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 July 11, 2020.17, 2021.
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 every Interactive Data File required to be submitted 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 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 |
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| Accelerated filer |
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| Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company |
| ☐ |
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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 August 11, 2020,17, 2021, the registrant had 35,833,25235,938,249 outstanding shares of common stock, no par value.
FORWARD-LOOKING STATEMENTS
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.
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 28, 2019January 2, 2021 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” discussions in Items 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019 and this Quarterly Report on Form 10-Q,January 2, 2021, 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 28, 2019January 2, 2021 and in Item 1A “Risk Factors” and Part I, Item 2 “Critical Accounting Policies” of this 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 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
TABLE OF CONTENTS
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| Page |
PART I. | 4 | |
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Item 1. | 4 | |
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| 4 | |
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| 5 | |
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| Condensed Consolidated Statements of Comprehensive Income | 6 |
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| 7 | |
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| 8 | |
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| 9 | |
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Item |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. | 29 | |
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Item 2. |
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Item 6. |
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3
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, Unaudited)
| July 11, |
|
| December 28, |
| July 17, |
|
| January 2, |
| |||||||||
| 2020 |
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| 2019 |
| 2021 |
|
| 2021 |
| |||||||||
Assets |
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Current assets |
|
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| |||
Cash and cash equivalents | $ |
| 34,645 |
|
| $ |
| 24,172 |
| $ |
| 24,136 |
|
| $ |
| 19,903 |
| |
Accounts and notes receivable, net |
|
| 374,394 |
|
|
|
| 345,320 |
|
|
| 370,669 |
|
|
|
| 357,564 |
| |
Inventories, net |
|
| 552,379 |
|
|
|
| 537,212 |
|
|
| 538,494 |
|
|
|
| 541,785 |
| |
Prepaid expenses and other current assets |
|
| 75,219 |
|
|
|
| 58,775 |
|
|
| 59,621 |
|
|
|
| 72,229 |
| |
Property and equipment held for sale |
|
| 22,038 |
|
|
|
| 31,203 |
|
|
| — |
|
|
|
| 23,259 |
| |
Total current assets |
|
| 1,058,675 |
|
|
|
| 996,682 |
|
|
| 992,920 |
|
|
|
| 1,014,740 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property and equipment, net |
|
| 562,806 |
|
|
|
| 615,816 |
|
|
| 567,043 |
|
|
|
| 577,059 |
| |
Goodwill |
|
| 181,035 |
|
|
|
| 181,035 |
|
|
| 181,035 |
|
|
|
| 181,035 |
| |
Intangible assets, net |
|
| 127,320 |
|
|
|
| 130,434 |
|
|
| 113,335 |
|
|
|
| 116,142 |
| |
Operating lease assets |
|
| 266,765 |
|
|
|
| 268,982 |
|
|
| 264,231 |
|
|
|
| 289,173 |
| |
Other assets, net |
|
| 99,948 |
|
|
|
| 82,660 |
|
|
| 90,583 |
|
|
|
| 99,242 |
| |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
| |
Total assets | $ |
| 2,296,549 |
|
| $ |
| 2,275,609 |
| $ |
| 2,209,147 |
|
| $ |
| 2,277,391 |
| |
|
|
|
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Liabilities and Shareholders’ Equity |
|
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Current liabilities |
|
|
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|
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|
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Accounts payable | $ |
| 489,412 |
|
| $ |
| 405,370 |
| $ |
| 441,888 |
|
| $ |
| 464,784 |
| |
Accrued payroll and benefits |
|
| 84,444 |
|
|
|
| 59,680 |
|
|
| 90,398 |
|
|
|
| 113,789 |
| |
Other accrued expenses |
|
| 54,629 |
|
|
|
| 51,295 |
|
|
| 65,822 |
|
|
|
| 60,060 |
| |
Current portion of operating lease liabilities |
|
| 43,398 |
|
|
|
| 42,440 |
|
|
| 44,720 |
|
|
|
| 45,786 |
| |
Current portion of long-term debt and finance lease liabilities |
|
| 5,489 |
|
|
|
| 6,349 |
|
|
| 5,719 |
|
|
|
| 5,135 |
| |
Total current liabilities |
|
| 677,372 |
|
|
|
| 565,134 |
|
|
| 648,547 |
|
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|
| 689,554 |
| |
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Long-term liabilities |
|
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Deferred income taxes |
|
| 57,681 |
|
|
|
| 43,111 |
|
|
| 54,442 |
|
|
|
| 45,728 |
| |
Operating lease liabilities |
|
| 260,770 |
|
|
|
| 267,350 |
|
|
| 254,114 |
|
|
|
| 278,859 |
| |
Other long-term liabilities |
|
| 39,269 |
|
|
|
| 30,272 |
|
|
| 50,294 |
|
|
|
| 46,892 |
| |
Long-term debt and finance lease liabilities |
|
| 552,206 |
|
|
|
| 682,204 |
|
|
| 445,574 |
|
|
|
| 481,309 |
| |
Total long-term liabilities |
|
| 909,926 |
|
|
|
| 1,022,937 |
|
|
| 804,424 |
|
|
|
| 852,788 |
| |
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Commitments and contingencies (Note 8) |
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| ||||||||||
Commitments and contingencies (Note 7) |
|
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Shareholders’ equity |
|
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Common stock, voting, no par value; 100,000 shares authorized; 35,842 and 36,351 shares outstanding |
|
| 483,484 |
|
|
|
| 490,233 |
| ||||||||||
Common stock, voting, no par value; 100,000 shares authorized; 35,943 and 35,851 shares outstanding |
|
| 490,870 |
|
|
|
| 491,819 |
| ||||||||||
Preferred stock, no par value, 10,000 shares authorized; 0 shares outstanding |
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
| |
Accumulated other comprehensive loss |
|
| (1,500 | ) |
|
|
| (1,600 | ) |
|
| (2,175 | ) |
|
|
| (2,276 | ) | |
Retained earnings |
|
| 227,267 |
|
|
|
| 198,905 |
|
|
| 267,481 |
|
|
|
| 245,506 |
| |
Total shareholders’ equity |
|
| 709,251 |
|
|
|
| 687,538 |
|
|
| 756,176 |
|
|
|
| 735,049 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total liabilities and shareholders’ equity | $ |
| 2,296,549 |
|
| $ |
| 2,275,609 |
| $ |
| 2,209,147 |
|
| $ |
| 2,277,391 |
|
See accompanying notes to condensed consolidated financial statements.
4
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSEARNINGS
(In thousands, except per share amounts)
(Unaudited)
| 12 Weeks Ended |
|
| 28 Weeks Ended |
|
| ||||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
|
| ||||||||
Net sales | $ |
| 2,184,101 |
|
| $ |
| 1,995,929 |
|
| $ |
| 5,040,557 |
|
| $ |
| 4,538,304 |
|
|
Cost of sales |
|
| 1,845,727 |
|
|
|
| 1,706,922 |
|
|
|
| 4,278,616 |
|
|
|
| 3,871,568 |
|
|
Gross profit |
|
| 338,374 |
|
|
|
| 289,007 |
|
|
|
| 761,941 |
|
|
|
| 666,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 300,727 |
|
|
|
| 266,474 |
|
|
|
| 692,027 |
|
|
|
| 626,874 |
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 582 |
|
|
|
| — |
|
|
|
| 1,364 |
|
|
Restructuring charges and asset impairment |
|
| 3,675 |
|
|
|
| 14,581 |
|
|
|
| 13,912 |
|
|
|
| 8,919 |
|
|
Total operating expenses |
|
| 304,402 |
|
|
|
| 281,637 |
|
|
|
| 705,939 |
|
|
|
| 637,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
| 33,972 |
|
|
|
| 7,370 |
|
|
|
| 56,002 |
|
|
|
| 29,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other expenses and (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 3,650 |
|
|
|
| 8,696 |
|
|
|
| 11,288 |
|
|
|
| 20,577 |
|
|
Postretirement benefit expense (income) |
|
| 101 |
|
|
|
| 8,821 |
|
|
|
| (698 | ) |
|
|
| 9,456 |
|
|
Other, net |
|
| (164 | ) |
|
|
| (439 | ) |
|
|
| (406 | ) |
|
|
| (891 | ) |
|
Total other expenses, net |
|
| 3,587 |
|
|
|
| 17,078 |
|
|
|
| 10,184 |
|
|
|
| 29,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes and discontinued operations |
|
| 30,385 |
|
|
|
| (9,708 | ) |
|
|
| 45,818 |
|
|
|
| 437 |
|
|
Income tax expense (benefit) |
|
| 1,918 |
|
|
|
| (2,941 | ) |
|
|
| 1,949 |
|
|
|
| (317 | ) |
|
Earnings (loss) from continuing operations |
|
| 28,467 |
|
|
|
| (6,767 | ) |
|
|
| 43,869 |
|
|
|
| 754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes |
|
| — |
|
|
|
| (47 | ) |
|
|
| — |
|
|
|
| (99 | ) |
|
Net earnings (loss) | $ |
| 28,467 |
|
| $ |
| (6,814 | ) |
| $ |
| 43,869 |
|
| $ |
| 655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations | $ |
| 0.80 |
|
| $ |
| (0.19 | ) |
| $ |
| 1.22 |
|
| $ |
| 0.02 |
|
|
Loss from discontinued operations |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
Net earnings (loss) | $ |
| 0.80 |
|
| $ |
| (0.19 | ) |
| $ |
| 1.22 |
|
| $ |
| 0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12 Weeks Ended |
|
| 28 Weeks Ended |
|
| ||||||||||||||
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
|
| ||||||||
Net sales | $ |
| 2,106,560 |
|
| $ |
| 2,184,101 |
|
| $ |
| 4,764,359 |
|
| $ |
| 5,040,557 |
|
|
Cost of sales |
|
| 1,772,933 |
|
|
|
| 1,845,727 |
|
|
|
| 4,012,702 |
|
|
|
| 4,278,616 |
|
|
Gross profit |
|
| 333,627 |
|
|
|
| 338,374 |
|
|
|
| 751,657 |
|
|
|
| 761,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 304,248 |
|
|
|
| 300,727 |
|
|
|
| 692,185 |
|
|
|
| 692,027 |
|
|
Acquisition and integration |
|
| 121 |
|
|
|
| — |
|
|
|
| 180 |
|
|
|
| — |
|
|
Restructuring and asset impairment, net |
|
| 3,337 |
|
|
|
| 3,675 |
|
|
|
| 3,176 |
|
|
|
| 13,912 |
|
|
Total operating expenses |
|
| 307,706 |
|
|
|
| 304,402 |
|
|
|
| 695,541 |
|
|
|
| 705,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
| 25,921 |
|
|
|
| 33,972 |
|
|
|
| 56,116 |
|
|
|
| 56,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses and (income) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 3,267 |
|
|
|
| 3,650 |
|
|
|
| 7,856 |
|
|
|
| 11,288 |
|
|
Other, net |
|
| (10 | ) |
|
|
| (63 | ) |
|
|
| (276 | ) |
|
|
| (1,104 | ) |
|
Total other expenses, net |
|
| 3,257 |
|
|
|
| 3,587 |
|
|
|
| 7,580 |
|
|
|
| 10,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
| 22,664 |
|
|
|
| 30,385 |
|
|
|
| 48,536 |
|
|
|
| 45,818 |
|
|
Income tax expense |
|
| 5,850 |
|
|
|
| 1,918 |
|
|
|
| 12,206 |
|
|
|
| 1,949 |
|
|
Net earnings | $ |
| 16,814 |
|
| $ |
| 28,467 |
|
| $ |
| 36,330 |
|
| $ |
| 43,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share: | $ |
| 0.47 |
|
| $ |
| 0.80 |
|
| $ |
| 1.02 |
|
| $ |
| 1.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per share: | $ |
| 0.47 |
|
| $ |
| 0.80 |
|
| $ |
| 1.01 |
|
| $ |
| 1.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, Unaudited)
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||||||||||
Net earnings (loss) | $ |
| 28,467 |
|
| $ |
| (6,814 | ) |
| $ |
| 43,869 |
|
| $ |
| 655 |
| |||||||||||||||||||
Net earnings | $ |
| 16,814 |
|
| $ |
| 28,467 |
|
| $ |
| 36,330 |
|
| $ |
| 43,869 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Pension and postretirement liability adjustment |
|
| 27 |
|
|
|
| 8,937 |
|
|
|
| 133 |
|
|
|
| 9,016 |
| |||||||||||||||||||
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Postretirement liability adjustment |
|
| 57 |
|
|
|
| 27 |
|
|
|
| 133 |
|
|
|
| 133 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense related to items of other comprehensive income |
|
| (7 | ) |
|
|
| (2,170 | ) |
|
|
| (33 | ) |
|
|
| (2,189 | ) |
|
| (13 | ) |
|
|
| (7 | ) |
|
|
| (32 | ) |
|
|
| (33 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, after tax |
|
| 20 |
|
|
|
| 6,767 |
|
|
|
| 100 |
|
|
|
| 6,827 |
|
|
| 44 |
|
|
|
| 20 |
|
|
|
| 101 |
|
|
|
| 100 |
|
Comprehensive income (loss) | $ |
| 28,487 |
|
| $ |
| (47 | ) |
| $ |
| 43,969 |
|
| $ |
| 7,482 |
| |||||||||||||||||||
Comprehensive income | $ |
| 16,858 |
|
| $ |
| 28,487 |
|
| $ |
| 36,431 |
|
| $ |
| 43,969 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
| 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 |
|
Issuance 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 |
|
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 28,467 |
|
|
|
| 28,467 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 20 |
|
|
|
| — |
|
|
|
| 20 |
|
Dividends - $0.1925 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,898 | ) |
|
|
| (6,898 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 1,904 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 1,904 |
|
Issuance of common stock for associate stock purchase plan |
| 6 |
|
|
|
| 100 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 100 |
|
Issuance of restricted stock |
| 159 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (5 | ) |
|
|
| (34 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (34 | ) |
Balance at July 11, 2020 |
| 35,842 |
|
| $ |
| 483,484 |
|
| $ |
| (1,500 | ) |
| $ |
| 227,267 |
|
| $ |
| 709,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| Loss |
|
| Earnings |
|
| Total |
| |||||||||
Balance at January 2, 2021 |
| 35,851 |
|
| $ |
| 491,819 |
|
| $ |
| (2,276 | ) |
| $ |
| 245,506 |
|
| $ |
| 735,049 |
|
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 19,516 |
|
|
|
| 19,516 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 57 |
|
|
|
| — |
|
|
|
| 57 |
|
Dividends - $0.20 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (7,238 | ) |
|
|
| (7,238 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 4,185 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 4,185 |
|
Stock warrant |
| — |
|
|
|
| 645 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 645 |
|
Issuances of common stock for stock bonus plan and associate stock purchase plan |
| 21 |
|
|
|
| 385 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 385 |
|
Issuances of restricted stock |
| 523 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (129 | ) |
|
|
| (2,079 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (2,079 | ) |
Balance at April 24, 2021 |
| 36,266 |
|
| $ |
| 494,955 |
|
| $ |
| (2,219 | ) |
| $ |
| 257,784 |
|
| $ |
| 750,520 |
|
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 16,814 |
|
|
|
| 16,814 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 44 |
|
|
|
| — |
|
|
|
| 44 |
|
Dividends - $0.20 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (7,117 | ) |
|
|
| (7,117 | ) |
Share repurchases |
| (265 | ) |
|
|
| (5,325 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (5,325 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 872 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 872 |
|
Stock warrant |
| — |
|
|
|
| 430 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 430 |
|
Issuances of common stock for associate stock purchase plan |
| 6 |
|
|
|
| 113 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 113 |
|
Issuances of restricted stock |
| 27 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (91 | ) |
|
|
| (175 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (175 | ) |
Balance at July 17, 2021 |
| 35,943 |
|
| $ |
| 490,870 |
|
| $ |
| (2,175 | ) |
| $ |
| 267,481 |
|
| $ |
| 756,176 |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| 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 |
|
Issuance 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 |
|
Net loss |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,814 | ) |
|
|
| (6,814 | ) |
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 6,767 |
|
|
|
| — |
|
|
|
| 6,767 |
|
Dividends - $0.19 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,902 | ) |
|
|
| (6,902 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 715 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 715 |
|
Issuance of common stock for associate stock purchase plan |
| 8 |
|
|
|
| 99 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 99 |
|
Issuance of restricted stock |
| 22 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (15 | ) |
|
|
| (22 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (22 | ) |
Balance at July 13, 2019 |
| 36,334 |
|
| $ |
| 488,947 |
|
| $ |
| (8,932 | ) |
| $ |
| 207,630 |
|
| $ |
| 687,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| Loss |
|
| Earnings |
|
| Total |
| |||||||||
Balance at December 28, 2019 |
| 36,351 |
|
| $ |
| 490,233 |
|
| $ |
| (1,600 | ) |
| $ |
| 198,905 |
|
| $ |
| 687,538 |
|
Impact of adoption of ASU 2016-13 (Note 2) |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (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 repurchases |
| (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 |
|
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 28,467 |
|
|
|
| 28,467 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 20 |
|
|
|
| — |
|
|
|
| 20 |
|
Dividends - $0.1925 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,898 | ) |
|
|
| (6,898 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 1,904 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 1,904 |
|
Issuance of common stock for associate stock purchase plan |
| 6 |
|
|
|
| 100 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 100 |
|
Issuances of restricted stock |
| 159 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (5 | ) |
|
|
| (34 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (34 | ) |
Balance at July 11, 2020 |
| 35,842 |
|
| $ |
| 483,484 |
|
| $ |
| (1,500 | ) |
| $ |
| 227,267 |
|
| $ |
| 709,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
7
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Unaudited)
| 28 Weeks Ended |
| 28 Weeks Ended |
| ||||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings | $ |
| 43,869 |
|
| $ |
| 655 |
| $ |
| 36,330 |
|
| $ |
| 43,869 |
|
Loss from discontinued operations, net of tax |
|
| — |
|
|
|
| 99 |
| |||||||||
Earnings from continuing operations |
|
| 43,869 |
|
|
|
| 754 |
| |||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash restructuring, asset impairment, and other charges |
|
| 12,323 |
|
|
|
| 15,226 |
|
|
| 3,363 |
|
|
|
| 12,323 |
|
Depreciation and amortization |
|
| 48,126 |
|
|
|
| 47,161 |
|
|
| 49,497 |
|
|
|
| 48,126 |
|
Non-cash rent |
|
| (3,618 | ) |
|
|
| (4,202 | ) |
|
| (1,756 | ) |
|
|
| (3,618 | ) |
LIFO expense |
|
| 2,771 |
|
|
|
| 2,493 |
|
|
| 4,557 |
|
|
|
| 2,771 |
|
Pension settlement expense |
|
| — |
|
|
|
| 8,877 |
| |||||||||
Postretirement benefits (income) expense |
|
| 52 |
|
|
|
| (1,092 | ) | |||||||||
Deferred taxes on income |
|
| (2,100 | ) |
|
|
| 2,509 |
| |||||||||
Postretirement benefits expense |
|
| 863 |
|
|
|
| 52 |
| |||||||||
Deferred income taxes |
|
| 8,714 |
|
|
|
| (2,100 | ) | |||||||||
Stock-based compensation expense |
|
| 4,246 |
|
|
|
| 6,098 |
|
|
| 5,057 |
|
|
|
| 4,246 |
|
Postretirement benefit plan contributions |
|
| (355 | ) |
|
|
| (231 | ) | |||||||||
Loss (gain) on disposals of assets |
|
| 3,368 |
|
|
|
| (6,863 | ) | |||||||||
Amortization of financing fees and other |
|
| 1,109 |
|
|
|
| 1,335 |
| |||||||||
Stock warrant |
|
| 1,075 |
|
|
|
| — |
| |||||||||
(Gain) loss on disposals of assets |
|
| (262 | ) |
|
|
| 3,368 |
| |||||||||
Other operating activities |
|
| 508 |
|
|
|
| 754 |
| |||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (30,576 | ) |
|
|
| (15,480 | ) |
|
| (12,622 | ) |
|
|
| (30,576 | ) |
Inventories |
|
| (18,218 | ) |
|
|
| 12,755 |
|
|
| (1,537 | ) |
|
|
| (18,218 | ) |
Prepaid expenses and other assets |
|
| (7,207 | ) |
|
|
| (41 | ) |
|
| (9,354 | ) |
|
|
| (7,207 | ) |
Accounts payable |
|
| 104,957 |
|
|
|
| 37,216 |
|
|
| (10,305 | ) |
|
|
| 104,957 |
|
Accrued payroll and benefits |
|
| 31,633 |
|
|
|
| (8,348 | ) |
|
| (22,781 | ) |
|
|
| 31,633 |
|
Current income taxes |
|
| 15,123 |
|
|
|
| 3,140 |
| |||||||||
Other accrued expenses and other liabilities |
|
| 7,868 |
|
|
|
| 5,669 |
|
|
| 7,112 |
|
|
|
| 4,728 |
|
Net cash provided by operating activities |
|
| 198,248 |
|
|
|
| 103,836 |
|
|
| 73,582 |
|
|
|
| 198,248 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (30,609 | ) |
|
|
| (31,771 | ) |
|
| (39,838 | ) |
|
|
| (30,609 | ) |
Net proceeds from the sale of assets |
|
| 8,002 |
|
|
|
| 16,129 |
|
|
| 28,406 |
|
|
|
| 8,002 |
|
Acquisitions, net of cash acquired |
|
| — |
|
|
|
| (86,659 | ) | |||||||||
Loans to customers |
|
| (822 | ) |
|
|
| (2,292 | ) |
|
| (180 | ) |
|
|
| (822 | ) |
Payments from customers on loans |
|
| 1,592 |
|
|
|
| 2,034 |
|
|
| 1,590 |
|
|
|
| 1,592 |
|
Other |
|
| (7 | ) |
|
|
| (50 | ) | |||||||||
Other investing activities |
|
| (16 | ) |
|
|
| (7 | ) | |||||||||
Net cash used in investing activities |
|
| (21,844 | ) |
|
|
| (102,609 | ) |
|
| (10,038 | ) |
|
|
| (21,844 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from senior secured revolving credit facility |
|
| 675,806 |
|
|
|
| 623,276 |
| |||||||||
Payments on senior secured revolving credit facility |
|
| (805,621 | ) |
|
|
| (618,180 | ) | |||||||||
Proceeds from other long-term debt |
|
| — |
|
|
|
| 5,800 |
| |||||||||
Proceeds from senior secured credit facility |
|
| 753,619 |
|
|
|
| 675,806 |
| |||||||||
Payments on senior secured credit facility |
|
| (787,996 | ) |
|
|
| (805,621 | ) | |||||||||
Repayment of other long-term debt and finance lease liabilities |
|
| (3,774 | ) |
|
|
| (9,758 | ) |
|
| (3,232 | ) |
|
|
| (3,774 | ) |
Financing fees paid |
|
| (182 | ) |
|
|
| (482 | ) | |||||||||
Proceeds from resolution of acquisition contingencies |
|
| — |
|
|
|
| 15,000 |
| |||||||||
Share repurchase |
|
| (10,000 | ) |
|
|
| — |
| |||||||||
Share repurchases |
|
| (5,325 | ) |
|
|
| (10,000 | ) | |||||||||
Net payments related to stock-based award activities |
|
| (1,389 | ) |
|
|
| (1,766 | ) |
|
| (2,254 | ) |
|
|
| (1,389 | ) |
Proceeds from exercise of stock options |
|
| — |
|
|
|
| 181 |
| |||||||||
Dividends paid |
|
| (20,771 | ) |
|
|
| (13,804 | ) |
|
| (14,274 | ) |
|
|
| (20,771 | ) |
Net cash (used in) provided by financing activities |
|
| (165,931 | ) |
|
|
| 267 |
| |||||||||
Net cash used in discontinued operations |
|
| — |
|
|
|
| (130 | ) | |||||||||
Other financing activities |
|
| 151 |
|
|
|
| (182 | ) | |||||||||
Net cash used in financing activities |
|
| (59,311 | ) |
|
|
| (165,931 | ) | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
Net increase in cash and cash equivalents |
|
| 10,473 |
|
|
|
| 1,364 |
|
|
| 4,233 |
|
|
|
| 10,473 |
|
Cash and cash equivalents at beginning of period |
|
| 24,172 |
|
|
|
| 18,585 |
|
|
| 19,903 |
|
|
|
| 24,172 |
|
Cash and cash equivalents at end of period | $ |
| 34,645 |
|
| $ |
| 19,949 |
| $ |
| 24,136 |
|
| $ |
| 34,645 |
|
See accompanying notes to condensed consolidated financial statements.
8
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 28, 2019.January 2, 2021.
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 July 11, 2020,17, 2021, 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.circumstances. Interim results are not necessarily indicative of results for a full year.
The unaudited information in the condensed consolidated financial statements for the second quarter and year-to-date periods of 20202021 and 20192020 include the results of operations of the Company for the 12- and 28-week periods ended July 17, 2021 and July 11, 2020, and July 13, 2019, respectively.
Note 2 – Adoption of New Accounting Standards and Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”. The ASU changed the impairment model for most financial assets and certain other instruments. The standard requires entities to use a forward-looking “expected loss” model that replaces the previous “incurred loss” model, which generally results in the earlier recognition of credit losses.
In the first quarter of 2020, the Company adopted this standard through the modified retrospective approach, with a cumulative-effect adjustment at the beginning of the fiscal year. As a result of the adoption, the Company has 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 both historical collection experience and expectations for current credit risks based on several customer and environmental factors.
9
The adoption of the standard resulted in a transition adjustment to 2020 beginning of the year retained earnings of $2.2 million (gross of the deferred tax impact of $0.6 million). The transition adjustment relates to incremental trade and notes 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 the balance of the allowance for doubtful accounts were as follows:
|
|
|
| Allowance for Doubtful Accounts |
| ||||||||||||
|
|
|
| Current Accounts |
|
| Long-term |
|
|
|
| ||||||
(In thousands) |
|
|
| and Notes Receivable |
|
| 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 |
|
|
|
|
| 419 |
|
|
|
| — |
|
|
|
| 419 |
|
Write-offs charged against the allowance |
|
|
|
|
| (206 | ) |
|
|
| (121 | ) |
|
|
| (327 | ) |
Balance at July 11, 2020 |
|
|
| $ |
| 4,863 |
|
| $ |
| 371 |
|
| $ |
| 5,234 |
|
The Company has evaluated the effects of the COVID-19 pandemic in performing its quarterly evaluations of the adequacy of the allowance for doubtful accounts. While the duration and impact of these affects is uncertain, the Company did not deem it necessary to record incremental allowances for doubtful accounts as no additional credit exposures were identified.
In August 2018, the FASB issued ASU 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 remove 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 fiscal years ending after December 15, 2020 and will be applied on a retrospective basis to all periods presented. The adoption of this guidance is not expected to have a significant effect 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:
| 12 Weeks Ended July 11, 2020 |
|
| 28 Weeks Ended July 11, 2020 |
| 12 Weeks Ended July 17, 2021 |
|
| 28 Weeks Ended July 17, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
|
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
|
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||||||||||||||||||||||||||
Type of products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center store (a) | $ |
| 359,025 |
|
| $ |
| 263,677 |
|
| $ |
| 223,463 |
|
| $ |
| 846,165 |
|
| $ |
| 810,347 |
|
| $ |
| 592,003 |
|
| $ |
| 563,759 |
|
| $ |
| 1,966,109 |
| $ |
| 339,057 |
|
| $ |
| 238,504 |
|
| $ |
| 205,075 |
|
| $ |
| 782,636 |
|
| $ |
| 790,834 |
|
| $ |
| 527,222 |
|
| $ |
| 487,137 |
|
| $ |
| 1,805,193 |
|
Fresh (b) |
|
| 382,255 |
|
|
|
| 250,127 |
|
|
|
| 138,451 |
|
|
|
| 770,833 |
|
|
|
| 849,918 |
|
|
|
| 545,130 |
|
|
|
| 334,118 |
|
|
|
| 1,729,166 |
|
|
| 362,922 |
|
|
|
| 242,209 |
|
|
|
| 129,772 |
|
|
|
| 734,903 |
|
|
|
| 810,130 |
|
|
|
| 525,244 |
|
|
|
| 299,464 |
|
|
|
| 1,634,838 |
|
Non-food (c) |
|
| 331,094 |
|
|
|
| 95,451 |
|
|
|
| 97,248 |
|
|
|
| 523,793 |
|
|
|
| 755,406 |
|
|
|
| 221,296 |
|
|
|
| 263,569 |
|
|
|
| 1,240,271 |
|
|
| 328,361 |
|
|
|
| 99,601 |
|
|
|
| 92,811 |
|
|
|
| 520,773 |
|
|
|
| 731,056 |
|
|
|
| 227,737 |
|
|
|
| 221,868 |
|
|
|
| 1,180,661 |
|
Fuel |
|
| — |
|
|
|
| 21,640 |
|
|
|
| — |
|
|
|
| 21,640 |
|
|
|
| — |
|
|
|
| 54,640 |
|
|
|
| — |
|
|
|
| 54,640 |
|
|
| — |
|
|
|
| 39,155 |
|
|
|
| — |
|
|
|
| 39,155 |
|
|
|
| — |
|
|
|
| 78,336 |
|
|
|
| — |
|
|
|
| 78,336 |
|
Other |
|
| 17,487 |
|
|
|
| 362 |
|
|
|
| 3,821 |
|
|
|
| 21,670 |
|
|
|
| 43,686 |
|
|
|
| 755 |
|
|
|
| 5,930 |
|
|
|
| 50,371 |
|
|
| 26,186 |
|
|
|
| 508 |
|
|
|
| 2,399 |
|
|
|
| 29,093 |
|
|
|
| 58,588 |
|
|
|
| 882 |
|
|
|
| 5,861 |
|
|
|
| 65,331 |
|
Total | $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
|
| $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
| $ |
| 1,056,526 |
|
| $ |
| 619,977 |
|
| $ |
| 430,057 |
|
| $ |
| 2,106,560 |
|
| $ |
| 2,390,608 |
|
| $ |
| 1,359,421 |
|
| $ |
| 1,014,330 |
|
| $ |
| 4,764,359 |
|
Type of customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals | $ |
| — |
|
| $ |
| 631,040 |
|
| $ |
| — |
|
| $ |
| 631,040 |
|
| $ |
| — |
|
| $ |
| 1,413,373 |
|
| $ |
| — |
|
| $ |
| 1,413,373 |
| $ |
| — |
|
| $ |
| 619,573 |
|
| $ |
| — |
|
| $ |
| 619,573 |
|
| $ |
| — |
|
| $ |
| 1,358,866 |
|
| $ |
| — |
|
| $ |
| 1,358,866 |
|
Manufacturers, brokers and distributors |
|
| 12,654 |
|
|
|
| — |
|
|
|
| 429,257 |
|
|
|
| 441,911 |
|
|
|
| 51,177 |
|
|
|
| — |
|
|
|
| 1,088,197 |
|
|
|
| 1,139,374 |
|
|
| 16,201 |
|
|
|
| — |
|
|
|
| 400,971 |
|
|
|
| 417,172 |
|
|
|
| 34,413 |
|
|
|
| — |
|
|
|
| 945,355 |
|
|
|
| 979,768 |
|
Retailers |
|
| 1,062,021 |
|
|
|
| — |
|
|
|
| 29,905 |
|
|
|
| 1,091,926 |
|
|
|
| 2,371,443 |
|
|
|
| — |
|
|
|
| 73,249 |
|
|
|
| 2,444,692 |
|
|
| 1,030,446 |
|
|
|
| — |
|
|
|
| 26,687 |
|
|
|
| 1,057,133 |
|
|
|
| 2,331,406 |
|
|
|
| — |
|
|
|
| 63,114 |
|
|
|
| 2,394,520 |
|
Other |
|
| 15,186 |
|
|
|
| 217 |
|
|
|
| 3,821 |
|
|
|
| 19,224 |
|
|
|
| 36,737 |
|
|
|
| 451 |
|
|
|
| 5,930 |
|
|
|
| 43,118 |
|
|
| 9,879 |
|
|
|
| 404 |
|
|
|
| 2,399 |
|
|
|
| 12,682 |
|
|
|
| 24,789 |
|
|
|
| 555 |
|
|
|
| 5,861 |
|
|
|
| 31,205 |
|
Total | $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
|
| $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
| $ |
| 1,056,526 |
|
| $ |
| 619,977 |
|
| $ |
| 430,057 |
|
| $ |
| 2,106,560 |
|
| $ |
| 2,390,608 |
|
| $ |
| 1,359,421 |
|
| $ |
| 1,014,330 |
|
| $ |
| 4,764,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
| 12 Weeks Ended July 13, 2019 |
|
| 28 Weeks Ended July 13, 2019 |
| 12 Weeks Ended July 11, 2020 |
|
| 28 Weeks Ended July 11, 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
|
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
|
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||||||||||||||||||||||||||
Type of products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center store (a) | $ |
| 268,299 |
|
| $ |
| 219,753 |
|
| $ |
| 226,031 |
|
| $ |
| 714,083 |
|
| $ |
| 623,770 |
|
| $ |
| 490,526 |
|
| $ |
| 536,441 |
|
| $ |
| 1,650,737 |
| $ |
| 359,025 |
|
| $ |
| 263,677 |
|
| $ |
| 223,463 |
|
| $ |
| 846,165 |
|
| $ |
| 810,347 |
|
| $ |
| 592,003 |
|
| $ |
| 563,759 |
|
| $ |
| 1,966,109 |
|
Fresh (b) |
|
| 343,853 |
|
|
|
| 218,942 |
|
|
|
| 146,201 |
|
|
|
| 708,996 |
|
|
|
| 772,621 |
|
|
|
| 481,889 |
|
|
|
| 343,223 |
|
|
|
| 1,597,733 |
|
|
| 382,255 |
|
|
|
| 250,127 |
|
|
|
| 138,451 |
|
|
|
| 770,833 |
|
|
|
| 849,918 |
|
|
|
| 545,130 |
|
|
|
| 334,118 |
|
|
|
| 1,729,166 |
|
Non-food (c) |
|
| 303,043 |
|
|
|
| 92,618 |
|
|
|
| 116,574 |
|
|
|
| 512,235 |
|
|
|
| 666,037 |
|
|
|
| 219,013 |
|
|
|
| 278,630 |
|
|
|
| 1,163,680 |
|
|
| 331,094 |
|
|
|
| 95,451 |
|
|
|
| 97,248 |
|
|
|
| 523,793 |
|
|
|
| 755,406 |
|
|
|
| 221,296 |
|
|
|
| 263,569 |
|
|
|
| 1,240,271 |
|
Fuel |
|
| — |
|
|
|
| 38,336 |
|
|
|
| — |
|
|
|
| 38,336 |
|
|
|
| — |
|
|
|
| 79,585 |
|
|
|
| — |
|
|
|
| 79,585 |
|
|
| — |
|
|
|
| 21,640 |
|
|
|
| — |
|
|
|
| 21,640 |
|
|
|
| — |
|
|
|
| 54,640 |
|
|
|
| — |
|
|
|
| 54,640 |
|
Other |
|
| 20,188 |
|
|
|
| 326 |
|
|
|
| 1,765 |
|
|
|
| 22,279 |
|
|
|
| 42,193 |
|
|
|
| 729 |
|
|
|
| 3,647 |
|
|
|
| 46,569 |
|
|
| 17,487 |
|
|
|
| 362 |
|
|
|
| 3,821 |
|
|
|
| 21,670 |
|
|
|
| 43,686 |
|
|
|
| 755 |
|
|
|
| 5,930 |
|
|
|
| 50,371 |
|
Total | $ |
| 935,383 |
|
| $ |
| 569,975 |
|
| $ |
| 490,571 |
|
| $ |
| 1,995,929 |
|
| $ |
| 2,104,621 |
|
| $ |
| 1,271,742 |
|
| $ |
| 1,161,941 |
|
| $ |
| 4,538,304 |
| $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
|
| $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
|
Type of customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals | $ |
| — |
|
| $ |
| 569,792 |
|
| $ |
| — |
|
| $ |
| 569,792 |
|
| $ |
| — |
|
| $ |
| 1,271,274 |
|
| $ |
| — |
|
| $ |
| 1,271,274 |
| $ |
| — |
|
| $ |
| 631,040 |
|
| $ |
| — |
|
| $ |
| 631,040 |
|
| $ |
| — |
|
| $ |
| 1,413,373 |
|
| $ |
| — |
|
| $ |
| 1,413,373 |
|
Manufacturers, brokers and distributors |
|
| 41,196 |
|
|
|
| — |
|
|
|
| 468,242 |
|
|
|
| 509,438 |
|
|
|
| 101,907 |
|
|
|
| — |
|
|
|
| 1,110,878 |
|
|
|
| 1,212,785 |
|
|
| 12,654 |
|
|
|
| — |
|
|
|
| 429,257 |
|
|
|
| 441,911 |
|
|
|
| 51,177 |
|
|
|
| — |
|
|
|
| 1,088,197 |
|
|
|
| 1,139,374 |
|
Retailers |
|
| 877,685 |
|
|
|
| — |
|
|
|
| 20,564 |
|
|
|
| 898,249 |
|
|
|
| 1,969,160 |
|
|
|
| — |
|
|
|
| 47,416 |
|
|
|
| 2,016,576 |
|
|
| 1,062,021 |
|
|
|
| — |
|
|
|
| 29,905 |
|
|
|
| 1,091,926 |
|
|
|
| 2,371,443 |
|
|
|
| — |
|
|
|
| 73,249 |
|
|
|
| 2,444,692 |
|
Other |
|
| 16,502 |
|
|
|
| 183 |
|
|
|
| 1,765 |
|
|
|
| 18,450 |
|
|
|
| 33,554 |
|
|
|
| 468 |
|
|
|
| 3,647 |
|
|
|
| 37,669 |
|
|
| 15,186 |
|
|
|
| 217 |
|
|
|
| 3,821 |
|
|
|
| 19,224 |
|
|
|
| 36,737 |
|
|
|
| 451 |
|
|
|
| 5,930 |
|
|
|
| 43,118 |
|
Total | $ |
| 935,383 |
|
| $ |
| 569,975 |
|
| $ |
| 490,571 |
|
| $ |
| 1,995,929 |
|
| $ |
| 2,104,621 |
|
| $ |
| 1,271,742 |
|
| $ |
| 1,161,941 |
|
| $ |
| 4,538,304 |
| $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
|
| $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Center store includes dry grocery, frozen and beverages. | (a) Center store includes dry grocery, frozen and beverages. |
| (a) Center store includes dry grocery, frozen and beverages. |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(b) Fresh includes produce, meat, dairy, deli, bakery, prepared proteins, seafood and floral. | (b) Fresh includes produce, meat, dairy, deli, bakery, prepared proteins, seafood and floral. |
|
|
|
|
|
| (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. | (c) Non-food includes general merchandise, health and beauty care, tobacco products and pharmacy. |
|
|
|
|
|
| (c) Non-food includes general merchandise, health and beauty care, tobacco products and pharmacy. |
|
|
|
|
|
|
10
Contract Assets and Liabilities
In the ordinary course of business,Under its contracts with customers, the Company may advance fundsstands ready to certain independent retailers which are earned by the retailers primarily through achieving specifieddeliver product upon receipt of a purchase volume requirements, as outlined in their supply agreements withorder. Accordingly, the Company has 0 performance obligations under its contracts until its customers submit a purchase order. The Company does not receive pre-payment from its customers or enter into commitments to provide goods or services that have terms greater than one year. As the performance obligation is part of a contract that has an original expected duration of less than one year, the Company has applied the practical expedient under ASC 606 to omit disclosures regarding remaining performance obligations.
Revenue recognized from performance obligations related to prior periods (for example, due to changes in limited instances, for remaining a SpartanNash customer for a specified time period. These advances must be repaid ifestimated rebates and incentives impacting the purchase volume requirements aretransaction price) was not met or if the retailer no longer remains a customer for the specified time period. material in any period presented.
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 realizability or collectability of customer advances were necessary as of July 11, 2020. These advances are not considered contract assets under ASC 606 as they are not generated through the transfer of goods or services to the retailers. These advances are included in “Prepaid expenses and other current assets” or “OtherOther assets, net” onnet within the Company’scondensed consolidated 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.customer. At contract inception, the Company expects that the period of time between the transfer of goods to the customer and when the customer pays for those goods will be less than one year, which is consistent with the Company’s standard payment terms. Accordingly, the Company has elected the practical expedient under ASC 606 to not adjust for the effects of a significant financing component. As such,a result, these amounts are recorded as receivables and not contract assets. The Company had 0 contract assets for any period presented.
The Company does not typically incur incremental costs of obtaining a contract that are contingent upon successful contract execution and would therefore be capitalized.
Note 4 – AcquisitionsAllowance for Doubtful Accounts
On December 31, 2018,Changes to the Company acquired allbalance of the outstanding shares of Martin’s Super Markets, Inc. (“Martin’s”)allowance for $86.7 million, net of $7.8 million of cash acquired. Acquired assets consist primarily of property and equipment of $55.0 million, intangible assets of $23.9 million, and working capital. Intangible assets are primarily composed of an indefinite-lived trade name of $20.6 million and pharmacy customer prescription lists of $3.1 million which are amortized over seven years. The acquired assets and assumed liabilitiesdoubtful accounts were recorded at their estimated fair values as of the acquisition date based on preliminary estimates, which were subsequently finalized during the fourth quarter of 2019. NaN goodwill was recorded related to the acquisition. The Company incurred $1.2 million of merger/acquisition and integration costs related to the acquisition in the prior year-to-date period. The acquisition was funded with proceeds from the Company’s Credit Agreement.follows:
|
|
|
| Allowance for Doubtful Accounts |
| ||||||||||||
|
|
|
| Current Accounts |
|
| Long-term |
|
|
|
| ||||||
(In thousands) |
|
|
| and Notes Receivable |
|
| Notes Receivable |
|
| Total |
| ||||||
Balance at January 2, 2021 |
|
|
| $ |
| 6,232 |
|
| $ |
| 371 |
|
| $ |
| 6,603 |
|
Changes in credit loss estimates |
|
|
|
|
| (1,092 | ) |
|
|
| 360 |
|
|
|
| (732 | ) |
Write-offs charged against the allowance |
|
|
|
|
| (499 | ) |
|
|
| — |
|
|
|
| (499 | ) |
Balance at July 17, 2021 |
|
|
| $ |
| 4,641 |
|
| $ |
| 731 |
|
| $ |
| 5,372 |
|
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.
|
|
|
| Allowance for Doubtful Accounts |
| ||||||||||||
|
|
|
| Current Accounts |
|
| Long-term |
|
|
|
| ||||||
(In thousands) |
|
|
| and Notes Receivable |
|
| 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 |
|
|
|
|
| 419 |
|
|
|
| — |
|
|
|
| 419 |
|
Write-offs charged against the allowance |
|
|
|
|
| (206 | ) |
|
|
| (121 | ) |
|
|
| (327 | ) |
Balance at July 11, 2020 |
|
|
| $ |
| 4,863 |
|
| $ |
| 371 |
|
| $ |
| 5,234 |
|
Note 54 – Goodwill and Other Intangible Assets
The Company has 3 reporting units; however, 0 goodwill exists within the Retail or Military reporting units. The carrying amount of goodwill recorded within the Food Distribution reporting unit was $181.0 million as of July 11, 202017, 2021 and December 28, 2019.January 2, 2021.
The Company has indefinite-lived intangible assets that are not amortized, consisting primarily of indefinite-lived trade names and licenses for the sale of alcoholic beverages. The carrying amount of indefinite-lived intangible assets was $67.6 million as of July 17, 2021 and January 2, 2021.
The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, during the fourth quarter of each year, and more frequently if circumstances indicate a risk of impairment.impairment is probable. Such circumstances have not arisen in the current fiscal year. 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.
The Company has indefinite-lived intangible assets that are not amortized, consisting primarily of indefinite-lived trade names and licenses for the sale of alcoholic beverages. The carrying amount of indefinite-lived intangible assets was $76.3 million as of July 11, 2020 and December 28, 2019.
11
Note 65 – Restructuring Charges and Asset Impairment
The following table provides the activity of reserves for closed properties for the 28-week period ended July 11, 2020.17, 2021. Included in the liability are lease-related ancillary costs from the date of closure to the end of the remaining lease term.term, as well as related severance. 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”.
|
|
|
| Reserves for Closed Properties |
|
|
|
| Reserves for Closed Properties |
| ||||||||||||||||||||||||
|
|
|
| Lease |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lease |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
| Ancillary |
|
|
|
|
|
|
|
|
|
| Ancillary |
|
|
|
|
|
|
|
|
|
|
| ||||||||
(In thousands) |
|
|
| Costs |
|
| Severance |
|
| Total |
|
|
|
| Costs |
|
| Severance |
|
| Total |
| ||||||||||||
Balance at December 28, 2019 |
|
|
| $ |
| 4,971 |
|
| $ |
| 17 |
|
| $ |
| 4,988 |
| |||||||||||||||||
Balance at January 2, 2021 |
|
|
| $ |
| 3,349 |
|
| $ |
| 114 |
|
| $ |
| 3,463 |
| |||||||||||||||||
Provision for closing charges |
|
|
|
|
| 325 |
|
|
|
| — |
|
|
|
| 325 |
|
|
|
|
|
| 1,410 |
|
|
|
| — |
|
|
|
| 1,410 |
|
Provision for severance |
|
|
|
|
| — |
|
|
|
| 2,205 |
|
|
|
| 2,205 |
|
|
|
|
|
| — |
|
|
|
| 124 |
|
|
|
| 124 |
|
Changes in estimates |
|
|
|
|
| 122 |
|
|
|
| — |
|
|
|
| 122 |
|
|
|
|
|
| (59 | ) |
|
|
| — |
|
|
|
| (59 | ) |
Accretion expense |
|
|
|
|
| 65 |
|
|
|
| — |
|
|
|
| 65 |
|
|
|
|
|
| 54 |
|
|
|
| — |
|
|
|
| 54 |
|
Payments |
|
|
|
|
| (1,412 | ) |
|
|
| (1,411 | ) |
|
|
| (2,823 | ) |
|
|
|
|
| (395 | ) |
|
|
| (238 | ) |
|
|
| (633 | ) |
Balance at July 11, 2020 |
|
|
| $ |
| 4,071 |
|
| $ |
| 811 |
|
| $ |
| 4,882 |
| |||||||||||||||||
Balance at July 17, 2021 |
|
|
| $ |
| 4,359 |
|
| $ |
| — |
|
| $ |
| 4,359 |
|
Restructuring and asset impairment, activity includednet in the condensed consolidated statements of operationsearnings consisted of the following:
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||
| July 11, |
|
| July 13, |
|
| July 11, |
|
| July 13, |
| ||||||||
(In thousands) | 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Asset impairment charges (a) | $ |
| 2,911 |
|
| $ |
| 13,966 |
|
| $ |
| 9,643 |
|
| $ |
| 14,066 |
|
Charge on customer advance (b) |
|
| — |
|
|
|
| 1,941 |
|
|
|
| — |
|
|
|
| 1,941 |
|
Provision for closing charges |
|
| — |
|
|
|
| 177 |
|
|
|
| 325 |
|
|
|
| 543 |
|
Loss (gain) on sales of assets related to closed facilities (c) |
|
| 59 |
|
|
|
| 20 |
|
|
|
| (31 | ) |
|
|
| (6,902 | ) |
Provision for severance (d) |
|
| 8 |
|
|
|
| — |
|
|
|
| 2,205 |
|
|
|
| 149 |
|
Other costs associated with site closures (e) |
|
| 642 |
|
|
|
| 365 |
|
|
|
| 1,648 |
|
|
|
| 975 |
|
Changes in estimates (f) |
|
| 55 |
|
|
|
| (246 | ) |
|
|
| 122 |
|
|
|
| (211 | ) |
Lease termination adjustments |
|
| — |
|
|
|
| (1,642 | ) |
|
|
| — |
|
|
|
| (1,642 | ) |
| $ |
| 3,675 |
|
| $ |
| 14,581 |
|
| $ |
| 13,912 |
|
| $ |
| 8,919 |
|
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| |||||||||||||
| July 17, |
| July 11, |
|
| July 17, |
|
| July 11, |
| ||||||||
(In thousands) | 2021 |
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||
Asset impairment charges (a) | $ |
| 2,820 |
| $ |
| 2,911 |
|
| $ |
| 3,576 |
|
| $ |
| 9,643 |
|
Provision for closing charges |
|
| 827 |
|
|
| — |
|
|
|
| 1,410 |
|
|
|
| 325 |
|
(Gain) loss on sales of assets related to closed facilities (b) |
|
| (326 | ) |
|
| 59 |
|
|
|
| (2,185 | ) |
|
|
| (31 | ) |
Provision for severance (c) |
|
| 40 |
|
|
| 8 |
|
|
|
| 124 |
|
|
|
| 2,205 |
|
Other (income) costs associated with site closures (d) |
|
| (24 | ) |
|
| 642 |
|
|
|
| 310 |
|
|
|
| 1,648 |
|
Changes in estimates |
|
| — |
|
|
| 55 |
|
|
|
| (59 | ) |
|
|
| 122 |
|
Total | $ |
| 3,337 |
| $ |
| 3,675 |
|
| $ |
| 3,176 |
|
| $ |
| 13,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Asset impairment charges in the current year were incurred primarily in the Food DistributionRetail segment and relate to current year store closures and previously closed locations. In the prior year, charges primarily relate to the Food Distribution segment with the exit of the Fresh Cut business and the sale of certain equipment assets of the previously closed Fresh Kitchen facility, which totaled $9.9 million. These impairments weremillion, partially offset by recoveries of $0.3 million related to the re-opening of a previously impaired distribution center. In the prior year, charges primarily relate to the repositioning of the Fresh Production operations within the Food Distribution segment.
(b) The charge on the customer advance relates to an advance to an independent retailer customer which was not fully recoverable.
(c) GainGains on sales of assets in the priorcurrent year primarily relatesrelate to the salesales of a previously closed distribution centerpharmacy customer lists associated with store closings in the Food DistributionRetail segment.
(d)(c) Severance in the currentprior year was related to the exit of the Fresh Cut business.
(e)(d) Other income net activity in the current year primarily relates to Retail store closings and restructuring activities. In the prior year, other costs primarily relaterelated to the Fresh Cut business and Retail store closings in the current year, and a Food Distribution warehouse and store closings in the prior year.
(f) Changes in estimates primarily relate to revised estimates for turnover and other lease ancillary costs associated with previously closed locations, due to deterioration of the condition of certain properties. closings.
Long-lived assets which are not recoverable are measured at fair value on a nonrecurring basis using Level 3 inputs.inputsunder the fair value hierarchy, as further described in Note 6. In the current year, assets with a book value of $22.5 million were measured at a fair value of $18.9 million, resulting in impairment charges of $3.6 million. In the prior year, in connection primarily with the Company’s exit of the Fresh Cut operations, and planned sales of certain Fresh Kitchen equipment assets in the current year, long-lived assets and definite-lived intangible assets were tested for recoverability. Long-lived assets with a book value of $32.7 million were measured at a fair value of $22.8 million, resulting in impairment charges of $9.9 million in 2020. Assets with a book value of $0.3 million were measured at amillion. The fair value of $0.2 million, resulting in an impairment charge of $0.1 million in 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.
12
In the second quarter of 2019 the Company announced a plan to reposition the Caito Fresh Production operations and to close the Fresh Kitchen. As a result of this plan, the Company evaluated the related indefinite-lived trade name and long-lived assets for potential impairment. The indefinite-lived trade name with a book value of $35.5 million was measured at a fair value of $21.5 million, resulting in an impairment charge of $14.0 million. During this test, the Company concluded the long-lived assets were not impaired. Indefinite lived intangible assets are tested for impairment at least annually, and as needed if an indicator of potential impairment exists. Indefinite lived intangible assets are measured at fair value using Level 3 inputs under the fair value hierarchy, as further described in Note 7 – Fair Value Measurements. Fair value of indefinite-lived assets is determined by estimating the amount and timing of net future cash flows, 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 and, in the case of indefinite-lived trade name assets, estimated royalty rates. The Company has evaluated assets held for sale as of July 11, 2020 and concluded that the Fresh Kitchen facility meets the requirements for held for sale classification. Assets classified as held for sale in the condensed consolidated balance sheet are valued at the expected net proceeds and are evaluated each quarter, resultingproceeds. The Fresh Kitchen facility, which was classified as held for sale as of January 2, 2021, was sold in the impairmentfirst quarter of equipment described in the section above.2021 for proceeds of $20.5 million.
12
Note 76 – Fair Value Measurements
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.
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 6Notes 4 and 5 for discussion of the fair value measurements related to long- or indefinite-lived asset impairment charges. At July 11, 202017, 2021 and December 28, 2019January 2, 2021 the book value and estimated fair value of the Company’s debt instruments, excluding debt financing costs, were as follows:
| July 11, |
|
| December 28, |
| July 17, |
|
| January 2, |
| ||||||||
(In thousands) | 2020 |
|
| 2019 |
| 2021 |
|
| 2021 |
| ||||||||
Book value of debt instruments, excluding debt financing costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and finance lease liabilities | $ |
| 5,489 |
|
| $ |
| 6,349 |
| $ |
| 5,719 |
|
| $ |
| 5,135 |
|
Long-term debt and finance lease liabilities |
|
| 556,939 |
|
|
|
| 687,659 |
|
|
| 448,907 |
|
|
|
| 485,381 |
|
Total book value of debt instruments |
|
| 562,428 |
|
|
|
| 694,008 |
|
|
| 454,626 |
|
|
|
| 490,516 |
|
Fair value of debt instruments, excluding debt financing costs |
|
| 565,007 |
|
|
|
| 700,631 |
|
|
| 460,498 |
|
|
|
| 497,941 |
|
Excess of fair value over book value | $ |
| 2,579 |
|
| $ |
| 6,623 |
| $ |
| 5,872 |
|
| $ |
| 7,425 |
|
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).
Note 87 – 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.
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 certain of 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 CBAs and vary by location. The Plan continues to be in red zone status, and according to the Pension Protection Act (“PPA”), is considered to be in “critical and declining” zone status. Among other factors, plans in the “critical and declining” zone are generally less than 65% funded and are projected to become insolvent within the next 15 years (or 20 years depending on the ratio of active-to-inactive participants).agreements. Based on the most recent information available to the Company, management believes that the present value of actuarial accrued liabilities in this multi-employer planthe Plan significantly exceeds the value of the assets held in trust to pay benefits. Because SpartanNash is 1 of a number of employers contributing to this plan,the Plan, it is difficult to ascertain whataccurately determine the exact amount of the underfunding would be.underfunding. Management is not aware of any significant change in funding levels since December 28, 2019. To reduce this underfunding, management expects increases in expense as a result of required incremental multi-employer pension plan contributions in future years.January 2, 2021. Any adjustment for withdrawal liability willwould be recorded when it is probable that a liability exists and can be reasonably determined.
On March 10, 2021, the United States Congress passed the American Rescue Plan Act of 2021 (the “Act”), which provides financial relief to certain failing multiemployer pension plans. In accordance with the interim guidance issued by the Pension Benefit Guaranty Corporation on July 9, 2021, the Act is designed to prevent such plans from becoming insolvent for the next 30 years. The Central States Plan is expected to apply and qualify for relief under the Act. As a result, the legislation and the available relief will alleviate the risk of insolvency of the Plan for the next 30 years, and related potential adverse impacts to the Company.
Note 98 – Associate Retirement Plans
During the 12- and 28-week28- week periods ended July 11, 2020,17, 2021, the Company recognized net periodic postretirement benefit costs of$0.1 $0.1 million and $0.3 million, respectively, related to the SpartanNash Retiree Medical Plan (“Retiree Medical Plan”). TheDuring the 12- and 28- week periods ended July 11, 2020, the Company alsorecognized net periodic postretirement benefit costs of $0.1 million and $0.3 million, respectively, related to the Retiree Medical Plan. In the first quarter of the prior year, the Company realized a gain of $1.0 million in the 28-week period ended July 11, 2020 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 other remaining assets in the pension trust, these funds will be used to satisfy obligations associated with other qualified retirement programs. During the 12- and 28-week periods ended July 13, 2019, the Company recognized net periodic pension expense of $8.8 million and $9.2 million, respectively, related to the Pension Plan and net periodic postretirement benefit costs of $0.1 million and $0.2 million, respectively, for the Retiree Medical Plan. Substantially all of these amounts are included in Postretirement benefit expense (income)“Other, net” in the condensed consolidated statements of operations.earnings.
The Company expects to make total contributions of approximately $0.5 million in 20202021 to the Retiree Medical Plan and has made $0.2 million in the year-to-date period. 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.
13
Multi-Employer Plans
In addition to the plans listed above, the Company participates in the Central States Southeast and Southwest Pension Fund, 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 payable. The Company’s contributions during the 12-week periods ended July 17, 2021 and July 11, 2020 and July 13, 2019 were $3.5$3.4 million and$3.4 $3.5 million, respectively. The Company’s contributions during the 28-week periods ended July 17, 2021 and July 11, 2020 and July 13, 2019 were $8.1$8.0 million and $8.2$8.1 million, respectively. See Note 87 for further information regarding contingencies related to the Company’s participation in the Central States Plan.
Note 109 – Income Taxes
The effective income tax rate was 6.3%25.8% and 30.3%6.3% for the 12 weeks ended July 11, 202017, 2021 and July 13, 2019,11, 2020, respectively. The effective income tax rate was 4.3%25.1% and -72.5%4.3% for the 28 weeks ended July 17, 2021 and July 11, 2020, and July 13, 2019, respectively. The differencedifferences from the federal statutory rate in the current year were primarily due to state taxes, partially offset by federal tax credits. In the prior year, the difference from the federal statutory rate was primarily the result of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, and related tax planning, as well as 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 significant discrete book losses and impairments with corresponding tax effects which occurred during the quarter and changed the year-to-date tax rate.
On March 27, 2020, the U.S. government enacted tax legislation to provide economic stimulus and support 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 benefitbenefits of $4.3$9.3 million duringin 2020, of which $5.2 million was recognized in the firstsecond quarter, of 2020, associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the
14
enactment of the Tax Cuts and Jobs Act (“Tax Reform”), wherewhen the federal statutory income tax rate was 35%. Further analysis ofIn the timing of the deduction of certain expenses, which may also be carried back to years prior to Tax Reform, resulted in recording an additional discrete income tax benefit of $5.2 million in the secondfirst quarter of 2020.2021, the Company received tax refunds totaling $25.7 million related to the amended prior year returns.
Note 1110 – Stock-Based CompensationShare-Based Payments
Share-Based Employee Awards
The Company previously sponsored asponsors shareholder-approved stock incentive plan (the “2015 Plan”)plans that providedprovide 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. 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, 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 2020 Plan provides for 1,635,000 newly reserved shares plus 736,578 shares previously available for grant under the 2015 Plan.officers and other key associates.
Stock-basedShare-based compensation expense recognized and included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations,earnings, and related tax impacts were as follows:
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| ||||||||
Restricted stock | $ |
| 1,904 |
|
| $ |
| 715 |
|
| $ |
| 4,246 |
|
| $ |
| 6,098 |
|
Income tax expense (benefit) |
|
| (480 | ) |
|
|
| (178 | ) |
|
|
| (259 | ) |
|
|
| (970 | ) |
Stock-based compensation expense, net of tax | $ |
| 1,424 |
|
| $ |
| 537 |
|
| $ |
| 3,987 |
|
| $ |
| 5,128 |
|
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) | July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Restricted stock expense | $ |
| 872 |
|
| $ |
| 1,904 |
|
| $ |
| 5,057 |
|
| $ |
| 4,246 |
|
Income tax benefit |
|
| (223 | ) |
|
|
| (480 | ) |
|
|
| (1,230 | ) |
|
|
| (259 | ) |
Restricted stock expense, net of tax | $ |
| 649 |
|
| $ |
| 1,424 |
|
| $ |
| 3,827 |
|
| $ |
| 3,987 |
|
The following table summarizes activity in the Plansstock incentive plans for the 28 weeks ended July 11, 2020:17, 2021:
|
|
|
|
|
| Weighted |
|
|
|
|
|
| Weighted |
| ||||
|
| Restricted |
|
| Average |
|
| Restricted |
|
| Average |
| ||||||
|
| Stock |
|
| Grant-Date |
|
| Stock |
|
| Grant-Date |
| ||||||
|
| Awards |
|
| Fair Value |
|
| Awards |
|
| Fair Value |
| ||||||
Outstanding at December 28, 2019 | $ |
| 928,733 |
|
| $ |
| 20.28 |
| |||||||||
Outstanding at January 2, 2021 |
|
| 973,948 |
|
| $ |
| 17.72 |
| |||||||||
Granted |
|
| 451,472 |
|
|
| 15.58 |
|
|
| 549,780 |
|
|
| 18.90 |
| ||
Vested |
|
| (366,134 | ) |
|
| 21.84 |
|
|
| (388,403 | ) |
|
| 19.81 |
| ||
Cancelled/Forfeited |
|
| (17,994 | ) |
|
|
| 18.57 |
|
|
| (98,441 | ) |
|
|
| 18.44 |
|
Outstanding at July 11, 2020 | $ |
| 996,077 |
|
| $ |
| 17.61 |
| |||||||||
Outstanding at July 17, 2021 |
|
| 1,036,884 |
|
| $ |
| 17.49 |
|
As of July 11, 2020,17, 2021, total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company’s stock incentive planplans is $7.3$9.2 million and is expected to be recognized over a weighted average period of 2.82.5 years.
1514
Stock Warrant
On October 7, 2020, in connection with its entry into a commercial agreement with Amazon.com, Inc. (“Amazon”), the Company issued Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon, a warrant to acquire up to an aggregate of 5,437,272 shares of the Company’s common stock (the “Warrant”), subject to certain vesting conditions. Warrant shares equivalent to 2.5% of the Company’s outstanding and issuable shares, or 1,087,455 shares, vested upon the signing of the commercial agreement, and had a grant date fair value of $5.51 per share. Warrant shares equivalent to up to 10.0% of the Company’s outstanding and issuable shares, or 4,349,817 shares, may vest in connection with conditions defined by the terms of the Warrant, as Amazon makes payments to the Company in connection with the commercial supply agreement, in increments of $200 million, and had a grant date fair value of $5.33 per share. Upon vesting, shares may be acquired at an exercise price of $17.7257. The right to purchase shares in connection with the Warrant expires on October 7, 2027.
Share-based payment expense recognized as a reduction of “Net sales” in the condensed consolidated statements of earnings, and related tax benefits were as follows:
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) | July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Warrant expense | $ |
| 430 |
|
| $ |
| — |
|
| $ |
| 1,075 |
|
| $ |
| — |
|
Income tax benefit |
|
| (37 | ) |
|
|
| — |
|
|
|
| (95 | ) |
|
|
| — |
|
Warrant expense, net of tax | $ |
| 393 |
|
| $ |
| — |
|
| $ |
| 980 |
|
| $ |
| — |
|
The following table summarizes stock warrant activity for the 28 weeks ended July 17, 2021:
Warrant | ||||||||||
Outstanding and nonvested at January 2, 2021 | 4,349,817 | |||||||||
Vested | 217,492 | |||||||||
Outstanding and nonvested at July 17, 2021 | 4,132,325 |
As of July 17, 2021, total unrecognized cost related to non-vested warrant shares was $21.6 million, which may be expensed as vesting conditions are satisfied over the remaining term of the agreement, or 6.2 years. Additionally, 1,304,947 warrant shares are vested and exercisable. As of July 17, 2021, nonvested warrant shares had an intrinsic value of $4.1 million, and vested warrant shares had an intrinsic value of $1.3 million.
Note 1211 – Earnings (Loss) Per Share
Outstanding nonvested restricted stock awards under the 2015 Stock Incentive Plan contain nonforfeitable rights to dividends or dividend equivalents, which participate in undistributed earnings with common stock. These awards are classified as participating securities and are included in the calculation of basic earnings per share. Awards under the 2020 Stock Incentive Plan do not contain nonforfeitable rights to dividends or dividend equivalents and are therefore not classified as participating securities. There were 0 stock warrants outstanding during the 12- and 28- week periods ended July 11, 2020. The dilutive impact of theseboth the restricted stock awards isand warrants are presented below, as applicable. The following table sets forth the computation of basic and diluted net earnings per share from continuing operations:share:
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||
(In thousands, except per share amounts) | July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations | $ |
| 28,467 |
|
| $ |
| (6,767 | ) |
| $ |
| 43,869 |
|
| $ |
| 754 |
| |||||||||||||||||||
Adjustment for earnings (loss) attributable to participating securities |
|
| (670 | ) |
|
|
| 172 |
|
|
|
| (1,070 | ) |
|
|
| (19 | ) | |||||||||||||||||||
Earnings (loss) from continuing operations used in calculating earnings per share | $ |
| 27,797 |
|
| $ |
| (6,595 | ) |
| $ |
| 42,799 |
|
| $ |
| 735 |
| |||||||||||||||||||
Net earnings | $ |
| 16,814 |
|
| $ |
| 28,467 |
|
| $ |
| 36,330 |
|
| $ |
| 43,869 |
| |||||||||||||||||||
Adjustment for earnings attributable to participating securities |
|
| (305 | ) |
|
|
| (670 | ) |
|
|
| (736 | ) |
|
|
| (1,070 | ) | |||||||||||||||||||
Net earnings used in calculating earnings per share | $ |
| 16,509 |
|
| $ |
| 27,797 |
|
| $ |
| 35,594 |
|
| $ |
| 42,799 |
| |||||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, including participating securities |
|
| 35,706 |
|
|
|
| 36,323 |
|
|
| 35,972 |
|
|
| 36,208 |
|
|
| 35,693 |
|
|
|
| 35,706 |
|
|
| 35,734 |
|
|
| 35,972 |
| ||||
Adjustment for participating securities |
|
| (840 | ) |
|
|
| (921 | ) |
|
|
| (877 | ) |
|
|
| (897 | ) |
|
| (648 | ) |
|
|
| (840 | ) |
|
|
| (724 | ) |
|
|
| (877 | ) |
Shares used in calculating basic earnings per share |
|
| 34,866 |
|
|
|
| 35,402 |
|
|
|
| 35,095 |
|
|
|
| 35,311 |
|
|
| 35,045 |
|
|
|
| 34,866 |
|
|
|
| 35,010 |
|
|
|
| 35,095 |
|
Effect of dilutive restricted stock awards |
|
| 1 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
| 63 |
|
|
|
| 1 |
|
|
| 44 |
|
|
| — |
| ||
Effect of dilutive stock warrant |
|
| 134 |
|
|
|
| — |
|
|
|
| 112 |
|
|
|
| — |
| |||||||||||||||||||
Shares used in calculating diluted earnings per share |
|
| 34,867 |
|
|
|
| 35,402 |
|
|
|
| 35,095 |
|
|
|
| 35,311 |
|
|
| 35,242 |
|
|
|
| 34,867 |
|
|
|
| 35,166 |
|
|
|
| 35,095 |
|
Basic earnings (loss) per share from continuing operations | $ |
| 0.80 |
|
| $ |
| (0.19 | ) |
| $ |
| 1.22 |
|
| $ |
| 0.02 |
| |||||||||||||||||||
Diluted earnings (loss) per share from continuing operations | $ |
| 0.80 |
|
| $ |
| (0.19 | ) |
| $ |
| 1.22 |
|
| $ |
| 0.02 |
| |||||||||||||||||||
Basic earnings per share | $ |
| 0.47 |
|
| $ |
| 0.80 |
|
| $ |
| 1.02 |
|
| $ |
| 1.22 |
| |||||||||||||||||||
Diluted earnings per share | $ |
| 0.47 |
|
| $ |
| 0.80 |
|
| $ |
| 1.01 |
|
| $ |
| 1.22 |
|
Note 1312 – Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
| 28 Weeks Ended |
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Non-cash financing activities: |
|
|
|
|
|
|
|
|
| |||||||||
Recognition of operating lease liabilities | $ |
| 19,952 |
|
| $ |
| 19,300 |
| |||||||||
Recognition of finance lease liabilities |
|
| 2,009 |
|
|
| — |
| ||||||||||
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capital expenditures included in accounts payable |
|
| 2,072 |
|
|
| 2,269 |
| $ |
| 1,990 |
|
| $ |
| 2,072 |
| |
Operating lease asset additions |
|
| 19,952 |
|
|
| 19,300 |
|
|
| 348 |
|
|
| 19,952 |
| ||
Finance lease asset additions |
|
| 2,009 |
|
|
| — |
|
|
| 1,721 |
|
|
| 2,009 |
| ||
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Dividends declared but unpaid |
|
| 31 |
|
|
| — |
|
|
| 131 |
|
|
| 31 |
| ||
Recognition of operating lease liabilities |
|
| 348 |
|
|
| 19,952 |
| ||||||||||
Recognition of finance lease liabilities |
|
| 1,721 |
|
|
| 2,009 |
| ||||||||||
Other supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash paid for interest |
|
| 10,572 |
|
|
| 20,642 |
|
|
| 6,924 |
|
|
| 10,572 |
|
16
Note 1413 – Reporting Segment Information
The following tables set forth information about the Company by reporting segment:
(In thousands) | Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||||||||||
12 Weeks Ended July 11, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
12 Weeks Ended July 17, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net sales to external customers | $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
| $ |
| 1,056,526 |
|
| $ |
| 619,977 |
|
| $ |
| 430,057 |
|
| $ |
| 2,106,560 |
|
Inter-segment sales |
|
| 273,892 |
|
|
| — |
|
|
| — |
|
|
| 273,892 |
|
|
| 269,627 |
|
|
| 245 |
|
|
| — |
|
|
| 269,872 |
| ||||||
Restructuring charges and asset impairment |
|
| 3,462 |
|
|
| 213 |
|
|
| — |
|
|
| 3,675 |
| ||||||||||||||||||||||
Acquisition and integration |
|
| — |
|
|
| 121 |
|
|
| — |
|
|
| 121 |
| ||||||||||||||||||||||
Restructuring and asset impairment |
|
| 781 |
|
|
| 2,556 |
|
|
| — |
|
|
| 3,337 |
| ||||||||||||||||||||||
Depreciation and amortization |
|
| 6,965 |
|
|
| 10,325 |
|
|
| 2,807 |
|
|
| 20,097 |
|
|
| 7,604 |
|
|
| 10,685 |
|
|
| 3,117 |
|
|
| 21,406 |
| ||||||
Operating earnings (loss) |
|
| 14,409 |
|
|
| 24,453 |
|
|
| (4,890 | ) |
|
| 33,972 |
|
|
| 16,678 |
|
|
| 12,711 |
|
|
| (3,468 | ) |
|
| 25,921 |
| ||||||
Capital expenditures |
|
| 4,377 |
|
|
|
| 5,596 |
|
|
| 2,743 |
|
|
| 12,716 |
|
|
| 4,437 |
|
|
|
| 8,542 |
|
|
| 4,735 |
|
|
| 17,714 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
12 Weeks Ended July 13, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
12 Weeks Ended July 11, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 935,383 |
|
| $ |
| 569,975 |
|
| $ |
| 490,571 |
|
| $ |
| 1,995,929 |
| $ |
| 1,089,861 |
|
| $ |
| 631,257 |
|
| $ |
| 462,983 |
|
| $ |
| 2,184,101 |
|
Inter-segment sales |
|
| 226,636 |
|
|
| — |
|
|
| — |
|
|
| 226,636 |
|
|
| 273,892 |
|
|
| — |
|
|
| — |
|
|
| 273,892 |
| ||||||
Merger/acquisition and integration |
|
| — |
|
|
| 582 |
|
|
| — |
|
|
| 582 |
| ||||||||||||||||||||||
Restructuring charges (gains) and asset impairment |
|
| 16,024 |
|
|
| (1,443 | ) |
|
| — |
|
|
| 14,581 |
| ||||||||||||||||||||||
Restructuring and asset impairment |
|
| 3,462 |
|
|
| 213 |
|
|
| — |
|
|
| 3,675 |
| ||||||||||||||||||||||
Depreciation and amortization |
|
| 6,965 |
|
|
| 10,325 |
|
|
| 2,807 |
|
|
| 20,097 |
| ||||||||||||||||||||||
Operating earnings (loss) |
|
| 14,409 |
|
|
| 24,453 |
|
|
| (4,890 | ) |
|
| 33,972 |
| ||||||||||||||||||||||
Capital expenditures |
|
| 4,377 |
|
|
| 5,596 |
|
|
| 2,743 |
|
|
| 12,716 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
28 Weeks Ended July 17, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 2,390,608 |
|
| $ |
| 1,359,421 |
|
| $ |
| 1,014,330 |
|
| $ |
| 4,764,359 |
| |||||||||||||||||||
Inter-segment sales |
|
| 580,258 |
|
|
|
| 418 |
|
|
| — |
|
|
| 580,676 |
| |||||||||||||||||||||
Acquisition and integration |
|
| — |
|
|
|
| 180 |
|
|
| — |
|
|
| 180 |
| |||||||||||||||||||||
Restructuring and asset impairment |
|
| 763 |
|
|
|
| 2,413 |
|
|
| — |
|
|
| 3,176 |
| |||||||||||||||||||||
Depreciation and amortization |
|
| 7,744 |
|
|
| 10,049 |
|
|
| 2,736 |
|
|
| 20,529 |
|
|
| 17,394 |
|
|
|
| 24,926 |
|
|
| 7,177 |
|
|
| 49,497 |
| |||||
Operating earnings (loss) |
|
| 272 |
|
|
| 8,701 |
|
|
| (1,603 | ) |
|
| 7,370 |
|
|
| 37,824 |
|
|
|
| 26,903 |
|
|
| (8,611 | ) |
|
| 56,116 |
| |||||
Capital expenditures |
|
| 3,189 |
|
|
| 11,305 |
|
|
| 1,271 |
|
|
| 15,765 |
|
|
| 14,393 |
|
|
|
| 17,677 |
|
|
| 7,768 |
|
|
| 39,838 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
28 Weeks Ended July 11, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net sales to external customers | $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
| $ |
| 2,459,357 |
|
| $ |
| 1,413,824 |
|
| $ |
| 1,167,376 |
|
| $ |
| 5,040,557 |
|
Inter-segment sales |
|
| 598,020 |
|
|
|
| — |
|
|
| — |
|
|
| 598,020 |
|
|
| 598,020 |
|
|
|
| — |
|
|
| — |
|
|
| 598,020 |
| ||||
Restructuring charges and asset impairment |
|
| 12,684 |
|
|
|
| 1,228 |
|
|
| — |
|
|
| 13,912 |
| |||||||||||||||||||||
Restructuring and asset impairment |
|
| 12,684 |
|
|
|
| 1,228 |
|
|
| — |
|
|
| 13,912 |
| |||||||||||||||||||||
Depreciation and amortization |
|
| 17,521 |
|
|
| 24,081 |
|
|
| 6,524 |
|
|
| 48,126 |
|
|
| 17,521 |
|
|
|
| 24,081 |
|
|
| 6,524 |
|
|
| 48,126 |
| |||||
Operating earnings (loss) |
|
| 25,799 |
|
|
|
| 37,098 |
|
|
| (6,895 | ) |
|
| 56,002 |
|
|
| 25,799 |
|
|
|
| 37,098 |
|
|
| (6,895 | ) |
|
| 56,002 |
| ||||
Capital expenditures |
|
| 11,396 |
|
|
|
| 15,190 |
|
|
| 4,023 |
|
|
| 30,609 |
|
|
| 11,396 |
|
|
|
| 15,190 |
|
|
| 4,023 |
|
|
| 30,609 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
28 Weeks Ended July 13, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 2,104,621 |
|
| $ |
| 1,271,742 |
|
| $ |
| 1,161,941 |
|
| $ |
| 4,538,304 |
| |||||||||||||||||||
Inter-segment sales |
|
| 515,044 |
|
|
|
| — |
|
|
| — |
|
|
| 515,044 |
| |||||||||||||||||||||
Merger/acquisition and integration |
|
| (130 | ) |
|
|
| 1,494 |
|
|
| — |
|
|
| 1,364 |
| |||||||||||||||||||||
Restructuring charges (gains) and asset impairment |
|
| 9,681 |
|
|
|
| (762 | ) |
|
| — |
|
|
| 8,919 |
| |||||||||||||||||||||
Depreciation and amortization |
|
| 17,977 |
|
|
|
| 22,851 |
|
|
| 6,333 |
|
|
| 47,161 |
| |||||||||||||||||||||
Operating earnings (loss) |
|
| 24,864 |
|
|
|
| 7,875 |
|
|
| (3,160 | ) |
|
| 29,579 |
| |||||||||||||||||||||
Capital expenditures |
|
| 7,438 |
|
|
|
| 21,920 |
|
|
| 2,413 |
|
|
| 31,771 |
|
|
|
|
|
|
|
| July 11, |
|
| December 28, |
|
|
|
|
|
|
| July 17, |
|
| January 2, |
| ||||||||
(In thousands) |
|
|
|
|
| 2020 |
|
| 2019 |
|
|
|
|
|
| 2021 |
|
| 2021 |
| ||||||||||
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Food Distribution |
|
|
|
|
| $ |
| 1,187,666 |
|
| $ |
| 1,087,307 |
|
|
|
|
|
| $ |
| 1,096,390 |
|
| $ |
| 1,112,961 |
| ||
Retail |
|
|
|
|
|
|
| 750,405 |
|
|
|
| 794,413 |
|
|
|
|
|
|
|
| 737,489 |
|
|
|
| 763,876 |
| ||
Military |
|
|
|
|
|
|
| 358,478 |
|
|
|
| 390,799 |
|
|
|
|
|
|
|
| 375,268 |
|
|
|
| 400,554 |
| ||
Discontinued operations |
|
|
|
|
|
|
| — |
|
|
|
| 3,090 |
| ||||||||||||||||
Total |
|
|
|
|
| $ |
| 2,296,549 |
|
| $ |
| 2,275,609 |
|
|
|
|
|
| $ |
| 2,209,147 |
|
| $ |
| 2,277,391 |
|
17
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 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 recommended social distancing and imposed quarantine and isolation measures on large portions of the population, including mandatory business closures. While these measures were designed to protect the overall public health, they had material adverse impacts on domestic and foreign economies and has resulted 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:
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 28, 2019.January 2, 2021.
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 and chain retailers, its corporate owned retail stores, military commissaries and exchanges in the United States, as well as operating a premier fresh produce distribution network. The Company operates three reportable business segments: Food Distribution, Retail and 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 independent grocers, the Company’s corporate owned retail stores, national retailers, food service distributors, and other customers. The Food Distribution segment primarily conducts business in the Midwest and Southeast regions of the United States.
18
As of the end of the second quarter, the Company’s Retail segment operated 155148 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, VG’s Grocery, and Dan’s Supermarket. The Company also offered pharmacy services in 9793 of its corporate owned retail stores and operated 3736 fuel centers. The retail stores have a “neighborhood market” focus to distinguish them from supercenters and limited assortment stores. The Company’s Customer FirstGrowth strategy is focused on meeting changing customer needs and preferences through a data-based decision-making process, while also increasing customer satisfaction through quality, service and 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, Iraq, Kuwait, Bahrain, DjiboutiQatar and Egypt.Djibouti. The Company distributes grocery products to 160 military commissaries and 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 is continuing to partnera partnership with DeCA in the rollout of private brand products to military commissaries, which began during the second quarter ofin fiscal 2017.
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 containcontained 53 weeks; therefore, the fourth quarter of fiscal 2020 will containcontained 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.
InThe majority of the Company’s revenues are not seasonal in nature. However, in certain geographic areas, the Company’s salescorporate retail stores and operating performance may vary with seasonality. Many storesindependent retail customers 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.patterns.
20202021 Second Quarter Highlights
The Company’s top priority continues to be the well-being and safety 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 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. Collaboration across the organization and the strength and resiliency of its people drove execution in a dynamic operating environment as SpartanNash supported the surge in consumer demand related to the COVID-19 pandemic, also resulting in improved profitability in the second quarter.
Key financial and operational highlights for the second quarter and fiscal year-to-date include the following:
| • | Net sales |
| • |
|
|
|
|
• |
|
| The Company generated cash from operating activities of |
|
|
|
|
1917
For the 53-week fiscal year ending January 2, 2021, the Company continues to expect to benefit from higher consumer food-at-home consumption related to the effects of COVID-19, however, the duration and magnitude of the impact remain uncertain. Given this uncertainty, the Company is unable to fully estimate the impact COVID-19 will have on sales for the remainder of 2020, although it believes sales will materially exceed its initial 2020 guidance. The Company is updating its annual outlook, from what was previously provided on May 27, 2020, to reflect actual year-to-date financial results, as well as expectations forincreased the remainderlow end of the fiscal year related2021 profitability outlook range. EPS is now expected to earnings trends. Specifically, these updates include incrementalrange from $1.56 to $1.69 per diluted share, with adjusted earningsEPS expected to range from $1.70 to $1.80 per diluted share, and adjusted EBITDA to range from continuing operations$200 to $210 million. The Company also now expects that Retail comparable sales will be negative 2.0% to 5.0% for the COVID-19 impact experienced to-date, as well as an estimate for the remainder of fiscal 2020.2021. Food Distribution sales are still expected to decline 1.0% to 3.0%, while Military Distribution sales are now expected to decline 9.0% to 13.0%.
Results of Operations
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 |
| ||||||||||||||||||
| 12 Weeks Ended |
|
| 28 Weeks Ended |
|
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 11, 2020 |
| ||||||
Net sales |
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 9.4 |
|
|
| 11.1 |
|
Gross profit |
| 15.5 |
|
|
| 14.5 |
|
|
| 15.1 |
|
|
| 14.7 |
|
|
| 17.1 |
|
|
| 14.3 |
|
Selling, general and administrative |
| 13.8 |
|
|
| 13.4 |
|
|
| 13.7 |
|
|
| 13.8 |
|
|
| 12.9 |
|
|
| 10.4 |
|
Restructuring charges and asset impairment |
| 0.2 |
|
|
| 0.7 |
|
|
| 0.3 |
|
|
| 0.2 |
|
|
| (74.8 | ) |
|
| 56.0 |
|
Operating earnings |
| 1.6 |
|
|
| 0.4 |
|
|
| 1.1 |
|
|
| 0.7 |
|
|
| 360.9 |
|
|
| 89.3 |
|
Other expenses and income |
| 0.2 |
|
|
| 0.9 |
|
|
| 0.2 |
|
|
| 0.6 |
|
|
| (79.0 | ) |
|
| (65.1 | ) |
Earnings (loss) before income taxes and discontinued operations |
| 1.4 |
|
|
| (0.5 | ) |
|
| 0.9 |
|
|
| 0.0 |
|
|
| 413.0 |
|
| ** |
| |
Income tax expense (benefit) |
| 0.1 |
|
|
| (0.1 | ) |
|
| 0.0 |
|
|
| (0.0 | ) |
|
| (165.2 | ) |
| ** |
| |
Earnings (loss) from continuing operations |
| 1.3 |
|
|
| (0.3 | ) |
|
| 0.9 |
|
|
| 0.0 |
|
|
| 520.7 |
|
| ** |
| |
Loss from discontinued operations, net of taxes |
| — |
|
|
| (0.0 | ) |
|
| — |
|
|
| (0.0 | ) |
|
| 100.0 |
|
| ** |
| |
Net earnings (loss) |
| 1.3 |
|
|
| (0.3 | ) |
|
| 0.9 |
|
|
| 0.0 |
|
|
| 517.8 |
|
| ** |
|
| Percentage of Net Sales |
|
| Percentage Change |
| ||||||||||||||||||
| 12 Weeks Ended |
|
| 28 Weeks Ended |
|
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 17, 2021 |
| ||||||
Net sales |
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| (3.6 | ) |
|
| (5.5 | ) |
Gross profit |
| 15.8 |
|
|
| 15.5 |
|
|
| 15.8 |
|
|
| 15.1 |
|
|
| (1.4 | ) |
|
| (1.3 | ) |
Selling, general and administrative |
| 14.4 |
|
|
| 13.8 |
|
|
| 14.5 |
|
|
| 13.7 |
|
|
| 1.2 |
|
|
| 0.0 |
|
Acquisition and integration |
| 0.0 |
|
|
| — |
|
|
| 0.0 |
|
|
| — |
|
| ** |
|
| ** |
| ||
Restructuring charges and asset impairment, net |
| 0.2 |
|
|
| 0.2 |
|
|
| 0.1 |
|
|
| 0.3 |
|
|
| (9.2 | ) |
|
| (77.2 | ) |
Operating earnings |
| 1.2 |
|
|
| 1.6 |
|
|
| 1.2 |
|
|
| 1.1 |
|
|
| (23.7 | ) |
|
| 0.2 |
|
Other expenses |
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| (9.2 | ) |
|
| (25.6 | ) |
Earnings before income taxes |
| 1.1 |
|
|
| 1.4 |
|
|
| 1.0 |
|
|
| 0.9 |
|
|
| (25.4 | ) |
|
| 5.9 |
|
Income tax expense |
| 0.3 |
|
|
| 0.1 |
|
|
| 0.3 |
|
|
| 0.0 |
|
| ** |
|
| ** |
| ||
Net earnings |
| 0.8 |
|
|
| 1.3 |
|
|
| 0.8 |
|
|
| 0.9 |
|
|
| (40.9 | ) |
|
| (17.2 | ) |
Note: Certain totals do not sum due to rounding.
** Not meaningful
Net Sales – The following table presents net sales by segment and variances in net sales:
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| Variance |
|
| July 11, 2020 |
|
| July 13, 2019 |
|
| Variance |
| July 17, 2021 |
|
| July 11, 2020 |
|
| Variance |
|
| July 17, 2021 |
|
| July 11, 2020 |
|
| Variance |
| ||||||||||||||||||||||||
Food Distribution | $ |
| 1,089,861 |
|
| $ |
| 935,383 |
|
| $ |
| 154,478 |
|
| $ |
| 2,459,357 |
|
| $ |
| 2,104,621 |
|
| $ |
| 354,736 |
| $ |
| 1,056,526 |
|
| $ |
| 1,089,861 |
|
| $ |
| (33,335 | ) |
| $ |
| 2,390,608 |
|
| $ |
| 2,459,357 |
|
| $ |
| (68,749 | ) |
Retail |
|
| 631,257 |
|
|
|
| 569,975 |
|
|
|
| 61,282 |
|
|
|
| 1,413,824 |
|
|
|
| 1,271,742 |
|
|
|
| 142,082 |
|
|
| 619,977 |
|
|
|
| 631,257 |
|
|
|
| (11,280 | ) |
|
|
| 1,359,421 |
|
|
|
| 1,413,824 |
|
|
|
| (54,403 | ) |
Military |
|
| 462,983 |
|
|
|
| 490,571 |
|
|
|
| (27,588 | ) |
|
|
| 1,167,376 |
|
|
|
| 1,161,941 |
|
|
|
| 5,435 |
|
|
| 430,057 |
|
|
|
| 462,983 |
|
|
|
| (32,926 | ) |
|
|
| 1,014,330 |
|
|
|
| 1,167,376 |
|
|
|
| (153,046 | ) |
Total net sales | $ |
| 2,184,101 |
|
| $ |
| 1,995,929 |
|
| $ |
| 188,172 |
|
| $ |
| 5,040,557 |
|
| $ |
| 4,538,304 |
|
| $ |
| 502,253 |
| $ |
| 2,106,560 |
|
| $ |
| 2,184,101 |
|
| $ |
| (77,541 | ) |
| $ |
| 4,764,359 |
|
| $ |
| 5,040,557 |
|
| $ |
| (276,198 | ) |
Net sales for the quarter ended July 11, 202017, 2021 (the “second quarter”) increased $188.2decreased $77.5 million, or 9.4%3.6%, to $2.18$2.11 billion from $2.00$2.18 billion in the quarter ended July 13, 201911, 2020 (the “prior year quarter”). Net sales for the year-to-date period ended July 11, 202017, 2021 (the “year-to-date period”) increased $502.3decreased $276.2 million, or 11.1%5.5%, to $5.04$4.76 billion from $4.54$5.04 billion in the year-to-date period ended July 13, 201911, 2020 (the “prior year-to-date period”). The increasesdecreases in net sales were driven primarily by incrementaldue to favorable prior year sales, attributable to increased consumer demand related to consumer behavior associated with the COVID-19, pandemic, beginning in the first quarter, as well as continuation of lower volumes within the Military segment at domestic commissaries following base access and shopping restrictions implemented in the prior year, partially offset by continued growth with certain existing customers in the Food Distribution segment.customers.
Food Distribution net sales increased $154.5decreased $33.3 million, or 16.5%3.1%, to $1.09$1.06 billion in the second quarter from $0.94$1.09 billion in the prior year quarter. Net sales for the year-to-date period increased $354.7decreased $68.7 million, or 16.9%2.8%, to $2.46$2.39 billion in the year-to-date period from $2.10$2.46 billion in the prior year-to-date period. The increasesdecreases were due to incremental volume associated withfavorable prior year sales attributable to increased consumer demand related to COVID-19, as well as salespartly offset by continued growth with certain existing Food Distribution customers. The decrease from the prior year-to-date period to the current year-to-date period was also due to impacts from the Company’s decision to exit its Fresh Production business, which accounted for a $21.7 million decline in segment revenues from the prior year-to-date period.
2018
Retail net sales increased $61.3decreased $11.3 million, or 10.8%1.8%, to $631.3$620.0 million in the second quarter from $570.0$631.3 million in the prior year quarter. Net sales for the year-to-date period increased $142.1decreased $54.4 million, or 11.2%3.8%, from $1.27$1.41 billion in the prior year-to-date period to $1.41$1.36 billion.The increasesdecreases in net sales were primarily due to incrementalfavorable prior year sales volume associated withattributable to increased consumer demand related to COVID-19, as discussed above.partially offset by an increase in fuel sales. Comparable store sales were 17.1%declined 2.7% for the quarter, and 16.3% for the year-to-date period and were partially offsethowever increased by the impact of lower fuel prices and gallons sold, as well as store closures.12.1% on a two-year comparable basis. 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. Acquired stores are included in the comparable sales calculation 13 periods after the acquisition date. Sales are compared to the same store’s operations from the prior year period for purposes of calculation of comparable store sales, or to the same store’s operations from the period two years ago in the case of a two-year comparison. 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 decreased $27.6$32.9 million, or 5.6%7.1%, to $463.0$430.1 million in the second quarter from $490.6$463.0 million in the prior year quarter. Net sales for the year-to-date period increased $5.4decreased $153.0 million, or 0.5%13.1%, from $1.16$1.17 billion in the prior year-to-date period to $1.17$1.01 billion. ForThe decreases were primarily due to the quarter, growth in export sales was more than offset by the impactcontinuation of lower volumes at domestic commissaries following base access and commissary shopping restrictions related to COVID-19 precautions. The increase forimplemented in the year-to-date period was due to increased volume resulting from the impact of the COVID-19 pandemic primarily during the first quarter, partially offset by the impact of commissary and base closures during the second quarter and lower comparable sales at Defense Commissary Agency (“DeCA”) operated locations prior to the onset of the pandemic.year.
Gross Profit – Gross profit represents net sales less cost of sales, which for all non-production operations includes 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 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 operations.earnings.
Gross profit increased $49.4decreased $4.7 million, or 17.1%1.4%, to $338.4$333.6 million in the second quarter from $289.0$338.4 million in the prior year quarter. As a percent of net sales, gross profit was 15.5%15.8% compared to 14.5%15.5% in the prior year quarter. Gross profit for the year-to-date period increased $95.2decreased $10.3 million, or 14.3%1.3%, from $666.7$761.9 million in the prior year-to-date period to $761.9$751.7 million in the current year. As a percent of net sales, gross profit for the year-to-date period was 15.1%15.8% compared to 14.7%15.1% in the prior year-to-date period. The second quarter changechanges in the gross profit rate waswere driven by improvements within the increase in Retail segment sales in proportion to total Company sales, which traditionally generate higher margin rates,Food Distribution and Military segments, as well as a reduced rate of inventory shrink in the Retail segment. The year-to-date improvement was driven by the increaseincreases in the proportion of margin accretive Retail and Food Distribution segment sales, as well as improved margin ratespartially offset by an increase in the Retail and Military segments.LIFO expense.
Selling, General and Administrative Expenses – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and wages, employee benefits, facility costs, shipping and handling, equipment rental, depreciation (to the extent not included in cost of sales), out-bound freight and other administrative expenses.
SG&A expenses for the second quarter increased $34.2$3.5 million, or 12.9%1.2%, to $300.7$304.2 million in the second quarter from $266.5$300.7 million in the prior year quarter, representing 13.8%14.4% of net sales in the second quarter compared to 13.4%13.8% in the prior year quarter. SG&A expenses for the year-to-date period increased $65.1 million, or 10.4%,nominally from $626.9$692.0 million in the prior year-to-date period to $692.0$692.2 million, and decreasedincreased from 13.8%13.7% as a percentage of net sales in the prior year-to-date period to 13.7%14.5% in the current year-to-date period. The increaseincreases in expenses as a rate of sales compared to the prior year quarter was primarilywere due to increases in incentive compensation due to improved overall Company performance as well as increases ina higher rate of supply chain expenses as a rate to sales,primarily in the Food Distribution segment and increases in health insurance expense, partially offset byincreased leverage of expenses from higher sales volume, particularly store labor and certain fixed costs. The decrease in expenses as a rate of sales for the year-to-date period was primarily due to improved operating leverage related to store labor and other operating expenses, as well as lower healthcare costs, partially offset by incremental incentive compensation expense, including incremental pay for frontline associates, and severance costs associated with cost-saving initiatives.expense.
Merger/Acquisition and Integration – Prior year quarter results included $0.6 million of merger/acquisitionAcquisition and integration expenses. The priorexpenses for the second quarter and year-to-date period included $1.4ended July 17, 2021 were $0.1 million of merger/acquisition and integration expenses. These expenses$0.2 million, respectively. Activities in the current year are mainly associated with the acquisition and integration of Martin’s Supermarkets.Super Markets.
21
Restructuring Charges and Asset Impairment – Second quarter and prior year quarter results included charges of $3.7$3.3 million and $14.6$3.7 million, respectively, of restructuring and asset impairment activity. The year-to-date period and the prior year-to-date period included charges of $3.2 million and $13.9 million, respectively. The current quarter and $8.9 million, respectively,current year-to-date amounts consist primarily of restructuringretail store closing and asset impairment activity.charges, partially offset by gains on the sale of pharmacy customer lists. The currentprior year quarter and prior year-to-date activity consists primarily of asset impairment charges and severance costs related to the restructuring of the Company’s Fresh Production business, as well as retail store closing charges. The prior year quarter and prior year-to-date amounts consist primarily of asset impairment charges associated with the decision to exit the Fresh Kitchen operations. The prior year-to-date charges are partially offset by gains on the sale of a previously closed distribution center.
19
Operating Earnings –The following table presents operating earnings (loss) by segment and variances in operating earnings (loss):.
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| Variance |
|
| July 11, 2020 |
|
| July 13, 2019 |
|
| Variance |
| July 17, 2021 |
|
| July 11, 2020 |
|
| Variance |
|
| July 17, 2021 |
|
| July 11, 2020 |
|
| Variance |
| ||||||||||||||||||||||||
Food Distribution | $ |
| 14,409 |
|
| $ |
| 272 |
|
| $ |
| 14,137 |
|
| $ |
| 25,799 |
|
| $ |
| 24,864 |
|
| $ |
| 935 |
| $ |
| 16,678 |
|
| $ |
| 14,409 |
|
| $ |
| 2,269 |
|
| $ |
| 37,824 |
|
| $ |
| 25,799 |
|
| $ |
| 12,025 |
|
Retail |
|
| 24,453 |
|
|
|
| 8,701 |
|
|
|
| 15,752 |
|
|
|
| 37,098 |
|
|
|
| 7,875 |
|
|
|
| 29,223 |
|
|
| 12,711 |
|
|
|
| 24,453 |
|
|
|
| (11,742 | ) |
|
|
| 26,903 |
|
|
|
| 37,098 |
|
|
|
| (10,195 | ) |
Military |
|
| (4,890 | ) |
|
|
| (1,603 | ) |
|
|
| (3,287 | ) |
|
|
| (6,895 | ) |
|
|
| (3,160 | ) |
|
|
| (3,735 | ) |
|
| (3,468 | ) |
|
|
| (4,890 | ) |
|
|
| 1,422 |
|
|
|
| (8,611 | ) |
|
|
| (6,895 | ) |
|
|
| (1,716 | ) |
Total operating earnings | $ |
| 33,972 |
|
| $ |
| 7,370 |
|
| $ |
| 26,602 |
|
| $ |
| 56,002 |
|
| $ |
| 29,579 |
|
| $ |
| 26,423 |
| $ |
| 25,921 |
|
| $ |
| 33,972 |
|
| $ |
| (8,051 | ) |
| $ |
| 56,116 |
|
| $ |
| 56,002 |
|
| $ |
| 114 |
|
Operating earnings increased $26.6decreased $8.1 million, or 360.9%23.7% to $34.0$25.9 million in the second quarter from $7.4$34.0 million in the prior year quarter. Operating earnings for the year-to-date period increased $26.4$0.1 million, or 89.3%0.2%, to $56.0$56.1 million from $29.6$56.0 million in the prior year-to-date period.The second quarter decrease was attributable to an increase was primarily a resultin the rate of increasedsupply chain expenses, the impact of decreased sales volume, as well asand increases in health insurance expense, partially offset by improved margin rates and lower restructuring charges, partially offset by incentive compensation and a higher supply chain expenses as a rate to sales.costs. The year-to-date period increase was primarily due to increased sales volumelower restructuring charges, improved margin rates, and lower incentive compensation costs, partially offset by higher incentive compensationan increase in the rate of supply chain expenses, the impact of decreased sales volume, and restructuring charges.increases in health insurance expense.
Food Distribution operating earnings increased $14.1$2.3 million, or 5,197.4%15.7%, to $14.4$16.7 million in the second quarter from $0.3$14.4 million in the prior year quarter. Operating earnings for the year-to-date period increased $0.9$12.0 million, or 3.8%46.6%, to $25.8$37.8 million from $24.9$25.8 million in the prior year-to-date period.The second quarter increase wasincreases in operating earnings for Food Distribution were due to favorable margin rates and lower asset impairment and restructuring charges, associated with changes to the Fresh Production business in the prior year quarter, a current year quarter increase in sales volume associated with the impacts of COVID-19, as well as cycling prior year operational losses in the Fresh Production business, partially offset by a higher incentive compensation expense and higherrate of supply chain expenses as a rate to sales. For the year-to-date period the increase inand lower sales volume and cycling of prior year operational losses in the Fresh Production business was offset by higher incentive compensation and asset impairment expenses.volume.
Retail operating earnings increased $15.8decreased $11.7 million, or 181.0%48.0% to $24.5$12.7 million in the second quarter from $8.7$24.5 million in the prior year quarter. Operating earnings for the year-to-date period increased $29.2decreased $10.2 million, or 371.1%27.5%, to $37.1$26.9 million from $7.9$37.1 million in the prior year-to-date period.The increasesdecreases in operating earnings were primarily attributable to the increasereduced margin rates, a decrease in sales volume, improvements in laborhigher healthcare expenses, and margin rates,including inventory shrink,higher asset impairment and lower healthcare costs,restructuring charges, partially offset by higherlower incentive compensation expense and compensation for frontline workers.expense.
Military operating loss increased $3.3decreased $1.4 million, or 205.1%29.1% to $4.9$3.5 million in the second quarter from $1.6$4.9 million in the prior year quarter. Operating loss for the year-to-date period increased $3.7$1.7 million, or 118.2%24.9%, to $6.9$8.6 million from $3.2$6.9 million in the prior year-to-date period.The increases were primarilysecond quarter decrease in operating loss was due to improvements in gross margin rates and lower incentive compensation, partially offset by the decrease in sales volume. The year-to-date increase in Military operating loss was attributable to increasesa decrease in thesales volume, and a higher rate of supply chain expenses, including additional compensation for frontline workers and additional sanitation measures,expense, partially offset by improvedimprovements in gross margin rates.
Interest Expense – Interest expense decreased $5.1$0.4 million, or 58.0%10.5%, to $3.7$3.3 million in the second quarter from $8.7$3.7 million in the prior year quarter. Interest expense for the year-to-date period decreased $9.3$3.4 million, or 45.1%30.4% from $20.6$11.3 million in the prior year-to-date period to $11.3$7.9 million. The decreasessecond quarter decrease in interest expense werewas due to significant decreases in the average debt balance. The year-to-date decrease in interest expense was due to rate decreases executedcuts implemented by the Federal Reserve during 2019the prior year, as well as during the first quarter of fiscal 2020 andsignificant decreases in the average debt balance.
Income Taxes – The effective income tax rates were 6.3%25.8% and 30.3%6.3% for the second quarter and prior year quarter, respectively. For the year-to-date period and prior year-to-date period, the effective income tax rates were 4.3%25.1% and -72.5%4.3%, respectively. The differencedifferences from the federal statutory rate in the current year were primarily resulteddue to state taxes, partially offset by federal tax credits. In the prior year, the differences from the federal statutory rate were primarily as a result of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and related tax planning, as well as 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 significant discrete book losses and impairments with corresponding tax effects which occurred during the quarter and changed the year-to-date tax rate.
On March 27, 2020, the U.S. government enacted tax legislation to provide economic stimulus and support 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$9.3 million duringin 2020, of which $5.2 million was recognized in the firstsecond quarter, of 2020, 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, (“Tax Reform”), when the federal statutory income tax rate was 35%. Further analysis ofIn the timing of the deduction of certain expenses, which may also be carried back to years prior to Tax Reform, resulted in recording an additional discrete income tax benefit of $5.2 million in the secondfirst quarter of 2020.2021, the Company received tax refunds totaling $25.7 million related to the amended prior year returns.
2220
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, Depreciationadjusted earnings before interest, taxes, depreciation and Amortizationamortization (“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 organizational realignment and severance associated with cost reduction initiatives. Organizational realignment includes benefits for associates terminated as part of a leadership transition plan which do not meet the definition of a reduction-in-force. Prior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude “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 income related to a refund from the annuity provider associated with the final reconciliation of participant data is excluded from adjusted earnings from continuing operations. TheseEach of these items are considered “non-operational” or “non-core” in nature.Prior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude costs associated with organizational realignment, which include significant changes to the Company’s management team. Also excluded are the fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Pension termination costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings.
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 an 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”)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.
23Following is a reconciliation of operating earnings to adjusted operating earnings for the 12 and 28 weeks ended July 17, 2021 and July 11, 2020.
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) | July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Operating earnings | $ |
| 25,921 |
|
| $ |
| 33,972 |
|
| $ |
| 56,116 |
|
| $ |
| 56,002 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and integration |
|
| 121 |
|
|
|
| — |
|
|
|
| 180 |
|
|
|
| — |
|
Restructuring and asset impairment, net |
|
| 3,337 |
|
|
|
| 3,675 |
|
|
|
| 3,176 |
|
|
|
| 13,912 |
|
Costs associated with Project One Team |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 493 |
|
Organizational realignment, net |
|
| (52 | ) |
|
|
| — |
|
|
|
| 589 |
|
|
|
| — |
|
Expenses associated with tax planning |
|
| — |
|
|
|
| 97 |
|
|
|
| — |
|
|
|
| 97 |
|
Severance associated with cost reduction initiatives |
|
| 13 |
|
|
|
| (75 | ) |
|
|
| 138 |
|
|
|
| 5,081 |
|
Fresh Cut operating losses |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
Adjusted operating earnings | $ |
| 29,340 |
|
| $ |
| 37,669 |
|
| $ |
| 60,199 |
|
| $ |
| 77,847 |
|
Following is a reconciliation of operating earnings (loss) to adjusted operating earnings (loss)by segment for the 12 and 28 weeks ended July 11, 202017, 2021 and July 13, 2019.11, 2020.
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||||||||||
Operating earnings | $ |
| 33,972 |
|
| $ |
| 7,370 |
|
| $ |
| 56,002 |
|
| $ |
| 29,579 |
| |||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Merger/acquisition and integration |
|
| — |
|
|
|
| 582 |
|
|
|
| — |
|
|
|
| 1,364 |
| |||||||||||||||||||
Restructuring, asset impairment and other |
|
| 3,675 |
|
|
|
| 14,581 |
|
|
|
| 13,912 |
|
|
|
| 8,919 |
| |||||||||||||||||||
Fresh Cut operating losses |
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
|
|
| — |
| |||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
|
| 810 |
|
|
|
| 493 |
|
|
|
| 5,428 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 19 |
|
|
|
| — |
|
|
|
| 877 |
| |||||||||||||||||||
Expenses associated with tax planning |
|
| 97 |
|
|
|
| — |
|
|
|
| 97 |
|
|
|
| — |
| |||||||||||||||||||
Pension termination |
|
| — |
|
|
|
| 20 |
|
|
|
| — |
|
|
|
| 20 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (75 | ) |
|
|
| 80 |
|
|
|
| 5,081 |
|
|
|
| 442 |
| |||||||||||||||||||
Adjusted operating earnings | $ |
| 37,669 |
|
| $ |
| 23,462 |
|
| $ |
| 77,847 |
|
| $ |
| 46,629 |
| |||||||||||||||||||
Reconciliation of operating earnings (loss) to adjusted operating earnings (loss) by segment: |
| |||||||||||||||||||||||||||||||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 14,409 |
|
| $ |
| 272 |
|
| $ |
| 25,799 |
|
| $ |
| 24,864 |
| $ |
| 16,678 |
|
| $ |
| 14,409 |
|
| $ |
| 37,824 |
|
| $ |
| 25,799 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Merger/acquisition and integration |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (130 | ) | |||||||||||||||||||
Restructuring, asset impairment and other |
|
| 3,462 |
|
|
|
| 16,024 |
|
|
|
| 12,684 |
|
|
|
| 9,681 |
| |||||||||||||||||||
Restructuring and asset impairment, net |
|
| 781 |
|
|
| 3,462 |
|
|
| 763 |
|
|
| 12,684 |
| ||||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 265 |
| ||||||||||||||||||||||
Organizational realignment, net |
|
| (26 | ) |
|
| — |
|
|
| 287 |
|
|
| — |
| ||||||||||||||||||||||
Expenses associated with tax planning |
|
| — |
|
|
| 52 |
|
|
| — |
|
|
| 52 |
| ||||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 4 |
|
|
| (37 | ) |
|
| 103 |
|
|
| 3,143 |
| ||||||||||||||||||||||
Fresh Cut operating losses |
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
Costs associated with Project One Team |
|
| — |
|
|
|
| 429 |
|
|
|
| 265 |
|
|
|
| 2,877 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 10 |
|
|
|
| — |
|
|
|
| 465 |
| |||||||||||||||||||
Expenses associated with tax planning |
|
| 52 |
|
|
|
| — |
|
|
|
| 52 |
|
|
|
| — |
| |||||||||||||||||||
Pension termination |
|
| — |
|
|
|
| 11 |
|
|
|
| — |
|
|
|
| 11 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (37 | ) |
|
|
| 37 |
|
|
|
| 3,143 |
|
|
|
| 361 |
| |||||||||||||||||||
Adjusted operating earnings | $ |
| 17,886 |
|
| $ |
| 16,783 |
|
| $ |
| 44,205 |
|
| $ |
| 38,129 |
| $ |
| 17,437 |
|
| $ |
| 17,886 |
|
| $ |
| 38,977 |
|
| $ |
| 44,205 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 24,453 |
|
| $ |
| 8,701 |
|
| $ |
| 37,098 |
|
| $ |
| 7,875 |
| $ |
| 12,711 |
|
| $ |
| 24,453 |
|
| $ |
| 26,903 |
|
| $ |
| 37,098 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Merger/acquisition and integration |
|
| — |
|
|
|
| 582 |
|
|
|
| — |
|
|
|
| 1,494 |
| |||||||||||||||||||
Restructuring charges (gains) and asset impairment |
|
| 213 |
|
|
|
| (1,443 | ) |
|
|
| 1,228 |
|
|
|
| (762 | ) | |||||||||||||||||||
Acquisition and integration |
|
| 121 |
|
|
| — |
|
|
| 180 |
|
|
| — |
| ||||||||||||||||||||||
Restructuring and asset impairment, net |
|
| 2,556 |
|
|
| 213 |
|
|
| 2,413 |
|
|
| 1,228 |
| ||||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
|
| 275 |
|
|
|
| 164 |
|
|
|
| 1,845 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
| |||
Organizational realignment costs |
|
| — |
|
|
|
| 6 |
|
|
|
| — |
|
|
|
| 298 |
| |||||||||||||||||||
Organizational realignment, net |
|
| (19 | ) |
|
| — |
|
|
| 215 |
|
|
| — |
| ||||||||||||||||||||||
Expenses associated with tax planning |
|
| 32 |
|
|
|
| — |
|
|
|
| 32 |
|
|
|
| — |
|
|
| — |
|
|
| 32 |
|
|
| — |
|
|
| 32 |
| |||
Pension termination |
|
| — |
|
|
|
| 7 |
|
|
|
| — |
|
|
|
| 7 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (19 | ) |
|
|
| 43 |
|
|
|
| 1,432 |
|
|
|
| 72 |
|
|
| — |
|
|
|
| (19 | ) |
|
|
| 29 |
|
|
|
| 1,432 |
|
Adjusted operating earnings | $ |
| 24,679 |
|
| $ |
| 8,171 |
|
| $ |
| 39,954 |
|
| $ |
| 10,829 |
| $ |
| 15,369 |
|
| $ |
| 24,679 |
|
| $ |
| 29,740 |
|
| $ |
| 39,954 |
|
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss | $ |
| (4,890 | ) |
| $ |
| (1,603 | ) |
| $ |
| (6,895 | ) |
| $ |
| (3,160 | ) | $ |
| (3,468 | ) |
| $ |
| (4,890 | ) |
| $ |
| (8,611 | ) |
| $ |
| (6,895 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Costs associated with Project One Team |
|
| — |
|
|
|
| 106 |
|
|
|
| 64 |
|
|
|
| 706 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64 |
| |||
Organizational realignment costs |
|
| — |
|
|
|
| 3 |
|
|
|
| — |
|
|
|
| 114 |
| |||||||||||||||||||
Organizational realignment, net |
|
| (7 | ) |
|
| — |
|
|
| 87 |
|
|
| — |
| ||||||||||||||||||||||
Expenses associated with tax planning |
|
| 13 |
|
|
|
| — |
|
|
|
| 13 |
|
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
| 13 |
| |||
Pension termination |
|
| — |
|
|
|
| 2 |
|
|
|
| — |
|
|
|
| 2 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (19 | ) |
|
|
| — |
|
|
|
| 506 |
|
|
|
| 9 |
|
|
| 9 |
|
|
|
| (19 | ) |
|
|
| 6 |
|
|
|
| 506 |
|
Adjusted operating loss | $ |
| (4,896 | ) |
| $ |
| (1,492 | ) |
| $ |
| (6,312 | ) |
| $ |
| (2,329 | ) | $ |
| (3,466 | ) |
| $ |
| (4,896 | ) |
| $ |
| (8,518 | ) |
| $ |
| (6,312 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings from Continuing Operations
Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as net 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.
24
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 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.
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.
22
Following is a reconciliation of net earnings (loss) from continuing operations to adjusted earnings from continuing operations for the 12 and 28 weeks ended July 11, 202017, 2021 and July 13, 2019.11, 2020.
| 12 Weeks Ended |
|
| 12 Weeks Ended |
|
| ||||||||||||||||||||||||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
|
| July 17, 2021 |
|
| July 11, 2020 |
|
| ||||||||||||||||||||||||||||
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
| ||||||||||||||||
(In thousands, except per share amounts) | Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| ||||||||||||||||
Earnings (loss) from continuing operations | $ |
| 28,467 |
|
| $ |
| 0.80 |
|
| $ |
| (6,767 | ) |
| $ |
| (0.19 | ) |
| ||||||||||||||||||||
Net earnings | $ |
| 16,814 |
|
| $ |
| 0.47 |
|
| $ |
| 28,467 |
|
| $ |
| 0.80 |
|
| ||||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
|
|
|
|
|
| 582 |
|
|
|
|
|
|
| ||||||||||||||||||||
Restructuring, asset impairment and other |
|
| 3,675 |
|
|
|
|
|
|
|
|
| 14,581 |
|
|
|
|
|
|
| ||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
|
|
|
|
|
|
| 810 |
|
|
|
|
|
|
| ||||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
| ||||||||||||||||||||
Acquisition and integration |
|
| 121 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Restructuring and asset impairment, net |
|
| 3,337 |
|
|
|
|
|
|
|
|
| 3,675 |
|
|
|
|
|
|
| ||||||||||||||||||||
Organizational realignment, net |
|
| (52 | ) |
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Expenses associated with tax planning |
|
| — |
|
|
|
|
|
|
|
|
| 97 |
|
|
|
|
|
|
| ||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (75 | ) |
|
|
|
|
|
|
|
| 80 |
|
|
|
|
|
|
|
|
| 13 |
|
|
|
|
|
|
|
|
| (75 | ) |
|
|
|
|
|
|
Expenses associated with tax planning |
|
| 97 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Pension termination |
|
| — |
|
|
|
|
|
|
|
|
| 8,998 |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments |
|
| 3,697 |
|
|
|
|
|
|
|
|
| 25,070 |
|
|
|
|
|
|
|
|
| 3,419 |
|
|
|
|
|
|
|
|
| 3,697 |
|
|
|
|
|
|
|
Income tax effect on adjustments (a) |
|
| (903 | ) |
|
|
|
|
|
|
|
| (6,112 | ) |
|
|
|
|
|
|
|
| (862 | ) |
|
|
|
|
|
|
|
| (903 | ) |
|
|
|
|
|
|
Impact of CARES Act (b) |
|
| (5,165 | ) |
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
| (5,165 | ) |
|
|
|
|
|
|
Total adjustments, net of taxes |
|
| (2,371 | ) |
|
|
| (0.07 | ) |
|
|
| 18,958 |
|
|
|
| 0.53 |
| * |
|
| 2,557 |
|
|
|
| 0.07 |
|
|
|
| (2,371 | ) |
|
|
| (0.07 | ) |
|
Adjusted earnings from continuing operations | $ |
| 26,096 |
|
| $ |
| 0.73 |
|
| $ |
| 12,191 |
|
| $ |
| 0.34 |
|
| $ |
| 19,371 |
|
| $ |
| 0.54 |
|
| $ |
| 26,096 |
|
| $ |
| 0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
| 28 Weeks Ended |
|
| |||||||||||||||||||||||||||||||||||||
| July 11, 2020 |
|
| July 13, 2019 |
|
| ||||||||||||||||||||||||||||||||||
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
| ||||||||||||||||||||||||||||
(In thousands, except per share amounts) | Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| ||||||||||||||||||||||||||||
Earnings from continuing operations | $ |
| 43,869 |
|
| $ |
| 1.22 |
|
| $ |
| 754 |
|
| $ |
| 0.02 |
|
| ||||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Merger/acquisition and integration |
|
| — |
|
|
|
|
|
|
|
|
| 1,364 |
|
|
|
|
|
|
| ||||||||||||||||||||
Restructuring, asset impairment and other |
|
| 13,912 |
|
|
|
|
|
|
|
|
| 8,919 |
|
|
|
|
|
|
| ||||||||||||||||||||
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Costs associated with Project One Team |
|
| 493 |
|
|
|
|
|
|
|
|
| 5,428 |
|
|
|
|
|
|
| ||||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
|
|
|
|
|
| 877 |
|
|
|
|
|
|
| ||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 5,081 |
|
|
|
|
|
|
|
|
| 442 |
|
|
|
|
|
|
| ||||||||||||||||||||
Expenses associated with tax planning |
|
| 97 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Pension termination |
|
| (1,004 | ) |
|
|
|
|
|
|
|
| 9,351 |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments |
|
| 20,841 |
|
|
|
|
|
|
|
|
| 26,381 |
|
|
|
|
|
|
| ||||||||||||||||||||
Income tax effect on adjustments (a) |
|
| (4,997 | ) |
|
|
|
|
|
|
|
| (6,416 | ) |
|
|
|
|
|
| ||||||||||||||||||||
Impact of CARES Act (b) |
|
| (9,510 | ) |
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments, net of taxes |
|
| 6,334 |
|
|
|
| 0.18 |
|
|
|
| 19,965 |
|
|
|
| 0.55 |
|
| ||||||||||||||||||||
Adjusted earnings from continuing operations | $ |
| 50,203 |
|
| $ |
| 1.40 |
|
| $ |
| 20,719 |
|
| $ |
| 0.57 |
|
| ||||||||||||||||||||
* Includes rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
| 28 Weeks Ended |
|
| |||||||||||||||||
| July 17, 2021 |
|
| July 11, 2020 |
|
| ||||||||||||||
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
| ||||||||
(In thousands, except per share amounts) | Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| ||||||||
Net earnings | $ |
| 36,330 |
|
| $ |
| 1.01 |
|
| $ |
| 43,869 |
|
| $ |
| 1.22 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition and integration |
|
| 180 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
Restructuring and asset impairment, net |
|
| 3,176 |
|
|
|
|
|
|
|
|
| 13,912 |
|
|
|
|
|
|
|
Costs associated with Project One Team |
|
| — |
|
|
|
|
|
|
|
|
| 493 |
|
|
|
|
|
|
|
Organizational realignment, net |
|
| 589 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
Expenses associated with tax planning |
|
| — |
|
|
|
|
|
|
|
|
| 97 |
|
|
|
|
|
|
|
Severance associated with cost reduction initiatives |
|
| 138 |
|
|
|
|
|
|
|
|
| 5,081 |
|
|
|
|
|
|
|
Fresh Cut operating losses |
|
| — |
|
|
|
|
|
|
|
|
| 2,262 |
|
|
|
|
|
|
|
Pension termination |
|
| — |
|
|
|
|
|
|
|
|
| (1,004 | ) |
|
|
|
|
|
|
Total adjustments |
|
| 4,083 |
|
|
|
|
|
|
|
|
| 20,841 |
|
|
|
|
|
|
|
Income tax effect on adjustments (a) |
|
| (1,024 | ) |
|
|
|
|
|
|
|
| (4,997 | ) |
|
|
|
|
|
|
Impact of CARES Act (b) |
|
| — |
|
|
|
|
|
|
|
|
| (9,510 | ) |
|
|
|
|
|
|
Total adjustments, net of taxes |
|
| 3,059 |
|
|
|
| 0.09 |
|
|
|
| 6,334 |
|
|
|
| 0.18 |
|
|
Adjusted earnings from continuing operations | $ |
| 39,389 |
|
| $ |
| 1.10 |
|
| $ |
| 50,203 |
|
| $ |
| 1.40 |
|
|
| (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, and related tax planning, primarily related to additional deductions and the utilization of net operating loss carryback. |
Adjusted EBITDA
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)share-based payments (equity awards measured in accordance with ASC 718, Stock Compensation, which include both stock-based compensation to employees and stock warrants issued to non-employees) and 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.
23
The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company 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 AmericaGAAP 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.
Following is a reconciliation of net earnings (loss) to adjusted EBITDA for the 12 and 28 weeks ended July 11, 202017, 2021 and July 13, 2019.11, 2020.
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||||||||||
Net earnings (loss) | $ |
| 28,467 |
|
| $ |
| (6,814 | ) |
| $ |
| 43,869 |
|
| $ |
| 655 |
| |||||||||||||||||||
Loss from discontinued operations, net of tax |
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| 99 |
| ||||||||||||||||||||||
Income tax expense (benefit) |
|
| 1,918 |
|
|
|
| (2,941 | ) |
|
|
| 1,949 |
|
|
|
| (317 | ) | |||||||||||||||||||
Net earnings | $ |
| 16,814 |
|
| $ |
| 28,467 |
|
| $ |
| 36,330 |
|
| $ |
| 43,869 |
| |||||||||||||||||||
Income tax expense |
|
| 5,850 |
|
|
| 1,918 |
|
|
| 12,206 |
|
|
| 1,949 |
| ||||||||||||||||||||||
Other expenses, net |
|
| 3,587 |
|
|
|
| 17,078 |
|
|
|
| 10,184 |
|
|
|
| 29,142 |
|
|
| 3,257 |
|
|
|
| 3,587 |
|
|
|
| 7,580 |
|
|
|
| 10,184 |
|
Operating earnings |
|
| 33,972 |
|
|
|
| 7,370 |
|
|
|
| 56,002 |
|
|
|
| 29,579 |
|
|
| 25,921 |
|
|
|
| 33,972 |
|
|
|
| 56,116 |
|
|
|
| 56,002 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIFO expense |
|
| 1,187 |
|
|
|
| 1,068 |
|
|
|
| 2,771 |
|
|
|
| 2,493 |
|
|
| 2,902 |
|
|
| 1,187 |
|
|
| 4,557 |
|
|
| 2,771 |
| |||
Depreciation and amortization |
|
| 20,097 |
|
|
|
| 20,529 |
|
|
|
| 47,753 |
|
|
|
| 47,161 |
|
|
| 21,406 |
|
|
| 20,097 |
|
|
| 49,497 |
|
|
| 47,753 |
| |||
Merger/acquisition and integration |
|
| — |
|
|
|
| 582 |
|
|
|
| — |
|
|
|
| 1,364 |
| |||||||||||||||||||
Restructuring, asset impairment and other charges |
|
| 3,675 |
|
|
|
| 14,581 |
|
|
|
| 13,912 |
|
|
|
| 8,919 |
| |||||||||||||||||||
Acquisition and integration |
|
| 121 |
|
|
| — |
|
|
| 180 |
|
|
| — |
| ||||||||||||||||||||||
Restructuring and asset impairment, net |
|
| 3,337 |
|
|
| 3,675 |
|
|
| 3,176 |
|
|
| 13,912 |
| ||||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 493 |
| ||||||||||||||||||||||
Organizational realignment, net |
|
| (52 | ) |
|
| — |
|
|
| 589 |
|
|
| — |
| ||||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 13 |
|
|
| (75 | ) |
|
| 138 |
|
|
| 5,081 |
| ||||||||||||||||||||||
Stock-based compensation |
|
| 974 |
|
|
| 1,905 |
|
|
| 5,164 |
|
|
| 4,148 |
| ||||||||||||||||||||||
Stock warrant |
|
| 430 |
|
|
| — |
|
|
| 1,075 |
|
|
| — |
| ||||||||||||||||||||||
Non-cash rent |
|
| (1,091 | ) |
|
| (1,199 | ) |
|
| (1,986 | ) |
|
| (2,793 | ) | ||||||||||||||||||||||
Fresh Cut operating losses |
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,262 |
| |||
Stock-based compensation |
|
| 1,905 |
|
|
|
| 715 |
|
|
|
| 4,148 |
|
|
|
| 6,098 |
| |||||||||||||||||||
Non-cash rent |
|
| (1,199 | ) |
|
|
| (1,516 | ) |
|
|
| (2,793 | ) |
|
|
| (3,434 | ) | |||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
|
| 810 |
|
|
|
| 493 |
|
|
|
| 5,428 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 19 |
|
|
|
| — |
|
|
|
| 877 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (75 | ) |
|
|
| 80 |
|
|
|
| 5,081 |
|
|
|
| 442 |
| |||||||||||||||||||
(Gain) loss on disposal of assets |
|
| (484 | ) |
|
|
| 63 |
|
|
|
| 3,427 |
|
|
|
| 61 |
|
|
| (80 | ) |
|
| (484 | ) |
|
| (262 | ) |
|
| 3,427 |
| |||
Other non-cash charges (gains) |
|
| 99 |
|
|
|
| 11 |
|
|
|
| 99 |
|
|
|
| (7 | ) | |||||||||||||||||||
Other non-cash charges |
|
| 478 |
|
|
|
| 99 |
|
|
|
| 958 |
|
|
|
| 99 |
| |||||||||||||||||||
Adjusted EBITDA | $ |
| 59,177 |
|
| $ |
| 44,312 |
|
| $ |
| 133,155 |
|
| $ |
| 98,981 |
| $ |
| 54,359 |
|
| $ |
| 59,177 |
|
| $ |
| 119,202 |
|
| $ |
| 133,155 |
|
26
Following is a reconciliation of operating earnings (loss) to adjusted EBITDA by segment for the 12 and 28 weeks ended July 11, 202017, 2021 and July 13, 2019.11, 2020.
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| 12 Weeks Ended |
|
| 28 Weeks Ended |
| ||||||||||||||||||||||||||||
(In thousands) | July 11, 2020 |
|
| July 13, 2019 |
|
| July 11, 2020 |
|
| July 13, 2019 |
| July 17, 2021 |
|
| July 11, 2020 |
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 14,409 |
|
| $ |
| 272 |
|
| $ |
| 25,799 |
|
| $ |
| 24,864 |
| $ |
| 16,678 |
|
| $ |
| 14,409 |
|
| $ |
| 37,824 |
|
| $ |
| 25,799 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIFO expense |
|
| 595 |
|
|
|
| 527 |
|
|
|
| 1,389 |
|
|
|
| 1,230 |
|
|
| 1,626 |
|
|
| 595 |
|
|
| 2,420 |
|
|
| 1,389 |
| |||
Depreciation and amortization |
|
| 6,965 |
|
|
|
| 7,744 |
|
|
|
| 17,148 |
|
|
|
| 17,977 |
|
|
| 7,604 |
|
|
| 6,965 |
|
|
| 17,394 |
|
|
| 17,148 |
| |||
Merger/acquisition and integration |
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (130 | ) | |||||||||||||||||||
Restructuring, asset impairment and other charges |
|
| 3,462 |
|
|
|
| 16,024 |
|
|
|
| 12,684 |
|
|
|
| 9,681 |
| |||||||||||||||||||
Restructuring and asset impairment, net |
|
| 781 |
|
|
| 3,462 |
|
|
| 763 |
|
|
| 12,684 |
| ||||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 265 |
| ||||||||||||||||||||||
Organizational realignment, net |
|
| (26 | ) |
|
| — |
|
|
| 287 |
|
|
| — |
| ||||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 4 |
|
|
| (37 | ) |
|
| 103 |
|
|
| 3,143 |
| ||||||||||||||||||||||
Stock-based compensation |
|
| 436 |
|
|
| 997 |
|
|
| 2,365 |
|
|
| 2,002 |
| ||||||||||||||||||||||
Stock warrant |
|
| 430 |
|
|
| — |
|
|
| 1,075 |
|
|
| — |
| ||||||||||||||||||||||
Non-cash rent |
|
| 143 |
|
|
| 36 |
|
|
| 917 |
|
|
| 94 |
| ||||||||||||||||||||||
Fresh Cut operating losses |
|
| — |
|
|
|
| — |
|
|
|
| 2,262 |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,262 |
| |||
Stock-based compensation |
|
| 997 |
|
|
|
| 341 |
|
|
|
| 2,002 |
|
|
|
| 3,017 |
| |||||||||||||||||||
Non-cash rent |
|
| 36 |
|
|
|
| 149 |
|
|
|
| 94 |
|
|
|
| 206 |
| |||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
|
| 429 |
|
|
|
| 265 |
|
|
|
| 2,877 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 10 |
|
|
|
| — |
|
|
|
| 465 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (37 | ) |
|
|
| 37 |
|
|
|
| 3,143 |
|
|
|
| 361 |
| |||||||||||||||||||
(Gain) loss on disposal of assets |
|
| (521 | ) |
|
|
| 11 |
|
|
|
| 1,619 |
|
|
|
| 6 |
|
|
| (62 | ) |
|
| (521 | ) |
|
| (99 | ) |
|
| 1,619 |
| |||
Other non-cash charges |
|
| 52 |
|
|
|
| 11 |
|
|
|
| 51 |
|
|
|
| 11 |
|
|
| 283 |
|
|
|
| 52 |
|
|
|
| 517 |
|
|
|
| 51 |
|
Adjusted EBITDA | $ |
| 25,958 |
|
| $ |
| 25,555 |
|
| $ |
| 66,456 |
|
| $ |
| 60,565 |
| $ |
| 27,897 |
|
| $ |
| 25,958 |
|
| $ |
| 63,566 |
|
| $ |
| 66,456 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 24,453 |
|
| $ |
| 8,701 |
|
| $ |
| 37,098 |
|
| $ |
| 7,875 |
| $ |
| 12,711 |
|
| $ |
| 24,453 |
|
| $ |
| 26,903 |
|
| $ |
| 37,098 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIFO expense |
|
| 258 |
|
|
|
| 257 |
|
|
|
| 601 |
|
|
|
| 601 |
|
|
| 477 |
|
|
| 258 |
|
|
| 892 |
|
|
| 601 |
| |||
Depreciation and amortization |
|
| 10,325 |
|
|
|
| 10,049 |
|
|
|
| 24,081 |
|
|
|
| 22,851 |
|
|
| 10,685 |
|
|
| 10,325 |
|
|
| 24,926 |
|
|
| 24,081 |
| |||
Merger/acquisition and integration |
|
| — |
|
|
|
| 582 |
|
|
|
| — |
|
|
|
| 1,494 |
| |||||||||||||||||||
Restructuring charges (gains) and asset impairment |
|
| 213 |
|
|
|
| (1,443 | ) |
|
|
| 1,228 |
|
|
|
| (762 | ) | |||||||||||||||||||
Acquisition and integration |
|
| 121 |
|
|
| — |
|
|
| 180 |
|
|
| — |
| ||||||||||||||||||||||
Restructuring and asset impairment, net |
|
| 2,556 |
|
|
| 213 |
|
|
| 2,413 |
|
|
| 1,228 |
| ||||||||||||||||||||||
Costs associated with Project One Team |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 164 |
| ||||||||||||||||||||||
Organizational realignment, net |
|
| (19 | ) |
|
| — |
|
|
| 215 |
|
|
| — |
| ||||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| — |
|
|
| (19 | ) |
|
| 29 |
|
|
| 1,432 |
| ||||||||||||||||||||||
Stock-based compensation |
|
| 642 |
|
|
|
| 250 |
|
|
|
| 1,392 |
|
|
|
| 2,103 |
|
|
| 390 |
|
|
| 642 |
|
|
| 1,870 |
|
|
| 1,392 |
| |||
Non-cash rent |
|
| (1,150 | ) |
|
|
| (1,573 | ) |
|
|
| (2,684 | ) |
|
|
| (3,426 | ) |
|
| (1,145 | ) |
|
| (1,150 | ) |
|
| (2,697 | ) |
|
| (2,684 | ) | |||
Costs associated with Project One Team |
|
| — |
|
|
|
| 275 |
|
|
|
| 164 |
|
|
|
| 1,845 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 6 |
|
|
|
| — |
|
|
|
| 298 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (19 | ) |
|
|
| 43 |
|
|
|
| 1,432 |
|
|
|
| 72 |
| |||||||||||||||||||
Loss on disposal of assets |
|
| 66 |
|
|
|
| 51 |
|
|
|
| 1,871 |
|
|
|
| 88 |
| |||||||||||||||||||
Other non-cash charges (gains) |
|
| 34 |
|
|
|
| (8 | ) |
|
|
| 34 |
|
|
|
| (31 | ) | |||||||||||||||||||
(Gain) loss on disposal of assets |
|
| (2 | ) |
|
| 66 |
|
|
| (125 | ) |
|
| 1,871 |
| ||||||||||||||||||||||
Other non-cash charges |
|
| 139 |
|
|
|
| 34 |
|
|
|
| 314 |
|
|
|
| 34 |
| |||||||||||||||||||
Adjusted EBITDA | $ |
| 34,822 |
|
| $ |
| 17,190 |
|
| $ |
| 65,217 |
|
| $ |
| 33,008 |
| $ |
| 25,913 |
|
| $ |
| 34,822 |
|
| $ |
| 54,920 |
|
| $ |
| 65,217 |
|
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss | $ |
| (4,890 | ) |
| $ |
| (1,603 | ) |
| $ |
| (6,895 | ) |
| $ |
| (3,160 | ) | $ |
| (3,468 | ) |
| $ |
| (4,890 | ) |
| $ |
| (8,611 | ) |
| $ |
| (6,895 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIFO expense |
|
| 335 |
|
|
|
| 284 |
|
|
|
| 781 |
|
|
|
| 662 |
|
|
| 799 |
|
|
| 335 |
|
|
| 1,245 |
|
|
| 781 |
| |||
Depreciation and amortization |
|
| 2,807 |
|
|
|
| 2,736 |
|
|
|
| 6,524 |
|
|
|
| 6,333 |
|
|
| 3,117 |
|
|
| 2,807 |
|
|
| 7,177 |
|
|
| 6,524 |
| |||
Costs associated with Project One Team |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64 |
| ||||||||||||||||||||||
Organizational realignment, net |
|
| (7 | ) |
|
| — |
|
|
| 87 |
|
|
| — |
| ||||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 9 |
|
|
| (19 | ) |
|
| 6 |
|
|
| 506 |
| ||||||||||||||||||||||
Stock-based compensation |
|
| 266 |
|
|
|
| 124 |
|
|
|
| 754 |
|
|
|
| 978 |
|
|
| 148 |
|
|
| 266 |
|
|
| 929 |
|
|
| 754 |
| |||
Non-cash rent |
|
| (85 | ) |
|
|
| (92 | ) |
|
|
| (203 | ) |
|
|
| (214 | ) |
|
| (89 | ) |
|
| (85 | ) |
|
| (206 | ) |
|
| (203 | ) | |||
Costs associated with Project One Team |
|
| — |
|
|
|
| 106 |
|
|
|
| 64 |
|
|
|
| 706 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 3 |
|
|
|
| — |
|
|
|
| 114 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| (19 | ) |
|
|
| — |
|
|
|
| 506 |
|
|
|
| 9 |
| |||||||||||||||||||
(Gain) loss on disposal of assets |
|
| (29 | ) |
|
|
| 1 |
|
|
|
| (63 | ) |
|
|
| (33 | ) | |||||||||||||||||||
Gain on disposal of assets |
|
| (16 | ) |
|
| (29 | ) |
|
| (38 | ) |
|
| (63 | ) | ||||||||||||||||||||||
Other non-cash charges |
|
| 12 |
|
|
|
| 8 |
|
|
|
| 14 |
|
|
|
| 13 |
|
|
| 56 |
|
|
|
| 12 |
|
|
|
| 127 |
|
|
|
| 14 |
|
Adjusted EBITDA | $ |
| (1,603 | ) |
| $ |
| 1,567 |
|
| $ |
| 1,482 |
|
| $ |
| 5,408 |
| $ |
| 549 |
|
| $ |
| (1,603 | ) |
| $ |
| 716 |
|
| $ |
| 1,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Liquidity and Capital Resources
Cash Flow Information
The following table summarizes the Company’s consolidated statements of cash flows:
|
|
|
| 28 Weeks Ended |
|
|
|
| 28 Weeks Ended |
| ||||||||||||||
(In thousands) |
|
|
| July 11, 2020 |
|
| July 13, 2019 |
|
|
|
| July 17, 2021 |
|
| July 11, 2020 |
| ||||||||
Cash flow activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
|
| $ |
| 198,248 |
|
| $ |
| 103,836 |
|
|
|
| $ |
| 73,582 |
|
| $ |
| 198,248 |
|
Net cash used in investing activities |
|
|
|
|
| (21,844 | ) |
|
| (102,609 | ) |
|
|
|
|
| (10,038 | ) |
|
| (21,844 | ) | ||
Net cash (used in) provided by financing activities |
|
|
|
|
| (165,931 | ) |
|
| 267 |
| |||||||||||||
Net cash used in discontinued operations |
|
|
|
|
| — |
|
|
|
| (130 | ) | ||||||||||||
Net cash used in financing activities |
|
|
|
|
| (59,311 | ) |
|
|
| (165,931 | ) | ||||||||||||
Net increase in cash and cash equivalents |
|
|
|
|
| 10,473 |
|
|
|
| 1,364 |
|
|
|
|
|
| 4,233 |
|
|
|
| 10,473 |
|
Cash and cash equivalents at beginning of the period |
|
|
|
|
| 24,172 |
|
|
|
| 18,585 |
|
|
|
|
|
| 19,903 |
|
|
|
| 24,172 |
|
Cash and cash equivalents at end of the period |
|
|
| $ |
| 34,645 |
|
| $ |
| 19,949 |
|
|
|
| $ |
| 24,136 |
|
| $ |
| 34,645 |
|
Net cash provided by operating activities. Net cash provided by operating activities increased duringdecreased $124.7 million in the current year-to-date period fromcompared to the prior year-to-date periodperiod. The change in cash provided by approximately $94.4 million primarilyoperating activities is due mainly to reductionssignificant prior year increases in sales volume related to the COVID-19 pandemic. The prior year sales volume increases resulted in increased purchases and increased related payables, which benefited prior year operating cash flows. In the current year, changes in working capital, and improved profitability.including the payout of incentive compensation amounts earned in the prior year unfavorably impacted operating cash flows.
Net cash used in investing activities. Net cash used in investing activities decreased $80.8$11.8 million in the current year compared to the prior year primarily due to proceeds on the acquisitionsale of Martin’sfixed assets in the priorcurrent year.
Capital expenditures were $30.6$39.8 million in the current year and cloud computing application development spend, which is included in operating activities, was $5.0$4.0 million, compared to capital expenditures of $31.8$30.6 million and cloud computing application development spend of $5.0 million in the prior year. The Company expects full fiscal year 20202021 capital expenditures and cloud computing application development spend to range from $80.0 million to $90.0 million. The Food Distribution, Retail and Military segments utilized 37.2%36.1%, 49.6%44.4% and 13.2%19.5% of capital expenditures, respectively, in the current year.
Net cash used in financing activities. Net cash used in financing activities increased $166.2decreased $106.6 million in the current year compared to the prior year primarily due to payment of debt balances inhigher net payments on the current year, which were funded from cash provided by operating activities, as well as borrowings to fund the Martin’s acquisitionsenior credit facility in the prior year.
Debt Management
Total debt, including finance lease liabilities, was $557.7$451.3 million and $688.6$486.4 million as of July 11, 202017, 2021 and December 28, 2019,January 2, 2021, respectively. The decrease in total debt was due to increased payments on the senior credit facility from cash provided by operating activities.
Liquidity
The Company’s principal sources of liquidity are cash flows generated from operations and its senior secured credit facility. As of July 11, 2020,17, 2021, the senior secured credit facility had outstanding borrowings of $513.1$405.8 million. Additional available borrowings under the Company’s 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 $333.0$392.1 million at July 11, 2020.17, 2021. 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 $14.2$16.1 million were outstanding as of July 11, 2020.17, 2021. The credit facility matures December 18, 2023 and is secured by substantially all of the Company’s assets.
The Company believes that cash generated from operating activities and available borrowings under the credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, dividend payments, and 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 Agreement.
The Company’s current ratio (current assets to current liabilities) was 1.56-to-11.53-to-1 at July 11, 202017, 2021 compared to 1.76-to-11.47-to-1 at December 28, 2019,January 2, 2021, and its investment in working capital was $381.3$344.4 million at July 11, 202017, 2021 compared to $431.5$325.2 million at December 28, 2019. NetJanuary 2, 2021. The net long-term debt to total capital ratio was 0.42-to-10.36-to-1 at July 11, 202017, 2021 compared to 0.49-to-10.39-to-1 at December 28, 2019.January 2, 2021.
2826
Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and finance lease liabilities, plus current maturitiesportion of long-term debt and finance lease 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 long-term debt, as defined previously, by total capital (net long-term 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 long-term 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 as of July 11, 202017, 2021 and December 28, 2019.January 2, 2021.
| July 11, |
|
| December 28, |
| July 17, |
|
| January 2, |
| ||||||||
(In thousands) | 2020 |
|
| 2019 |
| 2021 |
|
| 2020 |
| ||||||||
Current portion of long-term debt and finance lease liabilities | $ |
| 5,489 |
|
| $ |
| 6,349 |
| $ |
| 5,719 |
|
| $ |
| 5,135 |
|
Long-term debt and finance lease liabilities |
|
| 552,206 |
|
|
|
| 682,204 |
|
|
| 445,574 |
|
|
|
| 481,309 |
|
Total debt |
|
| 557,695 |
|
|
|
| 688,553 |
|
|
| 451,293 |
|
|
|
| 486,444 |
|
Cash and cash equivalents |
|
| (34,645 | ) |
|
|
| (24,172 | ) |
|
| (24,136 | ) |
|
|
| (19,903 | ) |
Net long-term debt | $ |
| 523,050 |
|
| $ |
| 664,381 |
| $ |
| 427,157 |
|
| $ |
| 466,541 |
|
For information on contractual obligations, see the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019.January 2, 2021. At July 11, 2020,17, 2021, there have been no material changes to the Company’s significant contractual obligations outside the ordinary course of business.
Cash Dividends
During the quarter ended July 11, 2020,17, 2021, the Company declared $6.9$7.1 million in dividends and declared $13.9 million for the year-to-date period.dividends. A 1.3%3.9% increase in the quarterly dividend rate from $0.19$0.1925 per share to $0.1925$0.20 per share was approved by the Board of Directors and announced on February 27, 2020.March 5, 2021. 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 $35.0 million. Additionally, the Company is generally permitted to pay cash dividends and repurchase shares in excess of $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 July 11, 2020.17, 2021. These commitments consist primarily of purchase commitments (as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 28, 2019)January 2, 2021), standby letters of credit of $11.7$16.1 million as of July 11, 2020,17, 2021, and interest on long-term debt and finance lease liabilities.
Critical Accounting Policies
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. 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 7 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019January 2, 2021 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 28, 2019.January 2, 2021.
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Recently Issued Accounting Standards
Refer to Note 2 in the notes to the condensed consolidated financial statements for further information.
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 28, 2019.January 2, 2021.
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 July 11, 202017, 2021 (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”), and Chief Financial Officer (“CFO”) andChief Accounting Officer (“CAO”). As of the Evaluation Date, SpartanNash Company’s management, including the CEO CFO and CAO,CFO, concluded that SpartanNash’s disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including its principal executive and principal financial officersofficer, as appropriate, to allow for timely decisions regarding required disclosure. During the second quarter of 20202021 there were no changes in SpartanNash’s internal control over financial reporting that materially affected, or were 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 the Company’s internal controls over financial reporting remained effective and were not materially affected.
30
PART II
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-week period ended July 11, 202017, 2021. 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 second quarter of 2020,2021, 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$5.3 million of share repurchases made under this program during the firstsecond quarter of 2020.2021. At July 11, 2020, $35.017, 2021, $29.7 million remains available under the program.
|
|
|
|
| Average |
|
|
|
|
| Average |
| ||||
| Total Number |
|
| Price Paid |
| Total Number |
|
| Price Paid |
| ||||||
Fiscal Period | of Shares Purchased |
|
| per Share |
| of Shares Purchased |
|
| per Share |
| ||||||
April 19 - May 16, 2020 |
|
|
|
|
|
|
|
| ||||||||
April 25 - May 22, 2021 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
| — |
|
| $ |
| — |
|
| — |
|
| $ |
| — |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
| — |
|
| $ |
| — |
|
May 17 - June 13, 2020 |
|
|
|
|
|
|
| |||||||||
May 23 - June 19, 2021 |
|
|
|
|
|
|
| |||||||||
Employee Transactions |
| 1,901 |
|
| $ |
| 18.99 |
|
| 8,480 |
|
| $ |
| 20.48 |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
| 160,000 |
|
| $ |
| 20.34 |
|
June 14 - July 11, 2020 |
|
|
|
|
|
|
| |||||||||
June 20 - July 17, 2021 |
|
|
|
|
|
|
| |||||||||
Employee Transactions |
| — |
|
| $ |
| — |
|
| — |
|
| $ |
| — |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
| 105,000 |
|
| $ |
| 19.67 |
|
Total for quarter ended July 11, 2020 |
|
|
|
|
|
|
|
| ||||||||
Total for quarter ended July 17, 2021 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
| 1,901 |
|
| $ |
| 18.99 |
|
| 8,480 |
|
| $ |
| 20.48 |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
| 265,000 |
|
| $ |
| 20.07 |
|
|
|
|
|
|
|
|
|
|
31
ITEM 6. Exhibits
The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
Exhibit |
| Document |
|
|
|
3.1 |
| |
|
|
|
3.2 |
| |
|
|
|
| ||
| ||
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
| Certification of Chief Financial |
|
| |
|
|
|
32.1 |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
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 July |
|
|
|
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| SPARTANNASH COMPANY (Registrant)
| ||
Date: August |
| By |
| /s/ |
|
|
|
|
Executive Vice President and Chief Financial Officer
|
3331