Business Wire | Feb 24, 2021 04:06PM EST

SpartanNash Announces Fourth Quarter and Fiscal 2020 Financial Results

Feb. 24, 2021

GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Feb. 24, 2021--SpartanNash Company (the "Company") (Nasdaq: SPTN) today reported financial results for its 13-week fourth quarter and 53-week fiscal year ended January 2, 2021. The Company's fourth quarter and current fiscal year include an additional week of operations compared to the 12- and 52-week prior year quarter and fiscal year, respectively.

Fourth Quarter and Fiscal 2020 Highlights

* Net sales growth of 12.5% to $2.25 billion for the quarter from $2.00 billion in the prior year quarter, and 9.5% to $9.35 billion for the fiscal year compared to $8.54 billion in the prior fiscal year. The 53rd week accounted for $158.9 million, or 8.0%, of the net sales increase over the prior year quarter. * Retail comparable store sales were 8.7% for the fourth quarter and 13.1% for the fiscal year. * Quarterly EPS of $0.34 per share, compared to $0.15 per share in the prior year quarter; adjusted EPS of $0.43 per share compared to $0.23 per share in the prior year quarter. Fiscal year EPS of $2.12 per share, compared to $0.16 per share in the prior year; adjusted EPS of $2.53 per share compared to $1.10 per share in the prior year. * Adjusted EBITDA(3) increased to $48.9 million from $37.4 million in the prior year quarter. Fiscal year adjusted EBITDA increased to $239.1 million from $177.9 million in the prior year. * Net long-term debt(5) decreased by $197.8 million during fiscal 2020 to $466.5 million. Combined with improved profitability, this led to a reduction of the net long-term debt to adjusted EBITDA ratio over from 3.7x to 2.0x.

"Despite the continued challenges presented by COVID-19 in the fourth quarter, I am proud of our team's performance. Since the beginning of the pandemic almost one year ago, they have remained dedicated to ensuring customer and associate safety, while providing essential services to our local communities," said Tony Sarsam, President and Chief Executive Officer. "As we move into 2021, we are renewing our focus on key priorities to best position SpartanNash for continued growth and operational efficiency."

Consolidated net sales for the fourth quarter increased $249.2 million, or 12.5%, to $2.25 billion from $2.00 billion in the prior year quarter, with the 53rd week contributing $158.9 million of net sales. The remaining increase in net sales was generated through continued growth with existing Food Distribution customers, as well as higher sales attributable to increased consumer demand related to COVID-19 in the Company's Retail and Food Distribution segments, partially offset by the continued impact of domestic base access and commissary shopping restrictions associated with COVID-19 in the Military segment.

Gross profit for the fourth quarter was $338.2 million, or 15.1% of net sales, compared to $286.7 million, or 14.4% of net sales, in the prior year quarter. The improvement in the gross profit rate was driven by improvements in margin rates at all three segments, as discussed further below, as well as an increase in the proportion of Retail and Food Distribution segment sales, which generate higher margin rates than the Military segment. These increases in gross profit rates were partially offset by non-cash warrant expense of $6.5 million associated with the issuance of warrant shares to Amazon early in the fourth quarter, recorded as a reduction of net sales in the Food Distribution segment.

Reported operating expenses for the fourth quarter were $320.8 million, or 14.3% of net sales, compared to $275.1 million, or 13.8% of net sales, in the prior year quarter. The increase in expenses as a rate of sales compared to the prior year quarter was due to increased corporate administrative expenses, including incentive compensation, a higher rate of supply chain expenses in the Food Distribution segment and a greater mix of Retail segment sales which have higher operating expense rates, largely offset by increased leverage of fixed costs in the Retail and Food Distribution segments.

The Company reported operating earnings of $17.4 million compared to $11.6 million in the prior year quarter due to the changes in net sales, gross profit and operating expenses discussed above. Adjusted operating earnings(1) were $22.0 million compared to $15.2 million in the prior year quarter and were adjusted for the items detailed in Table 3.

Interest expense decreased $3.0 million from the prior year quarter due to multiple rate cuts implemented by the Federal Reserve, as well as the Company's pay down of long-term debt resulting from strong free cash flow(4) during the year.

The Company reported earnings from continuing operations of $12.1 million, or $0.34 per share, compared to $5.5 million, or $0.15 per share in the prior year quarter. The improvement reflects the operating earnings and non-operating expense changes noted above. Adjusted earnings from continuing operations(2) for the fourth quarter were $15.5 million, or $0.43 per diluted share, compared to $8.3 million, or $0.23 per diluted share in the prior year quarter. A reconciliation of reported earnings from continuing operations to adjusted earnings from continuing operations is included at Table 4.

Adjusted EBITDA(3) increased $11.5 million, or 30.7%, to $48.9 million compared to $37.4 million in the prior year quarter due to factors mentioned above.

Please see the financial tables at the end of this press release for a reconciliation of each non-GAAP financial measure to the most directly comparable measure, prepared and presented in accordance with GAAP.

Segment Financial Results

Food Distribution

Net sales for Food Distribution increased $166.7 million, or 17.8%, to $1.11 billion from $0.94 billion in the prior year quarter. The increase was due to sales growth with existing customers, as well as incremental volume associated with increased consumer demand related to COVID-19, partially offset by the impact of the Company's decision to exit its Fresh Production operations, and the non-cash warrant impact mentioned previously. The 53rd week contributed $76.4 million of net sales.

Reported operating earnings for Food Distribution were $11.0 million compared to $10.9 million in the prior year quarter. The increase in reported operating earnings for Food Distribution was due to increased earnings due to higher sales volume, favorable margin rates, lower asset impairment charges, and cycling prior year losses in the Fresh Production business, largely offset by higher supply chain costs, which were compounded by the effects of the COVID-19 pandemic, non-cash warrant impact and higher corporate administrative expenses. Fourth quarter adjusted operating earnings(1) were $13.1 million compared to $15.7 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges in both years and losses associated with the Fresh Kitchen operations in the fourth quarter of fiscal 2019.

Retail

Net sales for Retail increased $79.4 million, or 14.5%, to $627.4 million from $548.0 million in the prior year quarter primarily due to increased consumer demand, as discussed above. Comparable store sales of 8.7% were partially offset by the impact of lower fuel sales. The Company experienced nearly 180% growth in its eCommerce business, compared to the same quarter in the prior year. The 53rd week contributed $49.1 million of net sales.

Reported operating earnings for Retail were $6.9 million compared to $4.2 million in the prior year quarter. The increase in reported operating earnings was due to the increase in sales volume, improvements in margin rates, including inventory shrink, and improved leverage of store labor. These favorable variances were partially offset by higher incentive compensation due to the improved segment performance. Adjusted operating earnings(1) were $9.4 million compared to $3.0 million in the prior year quarter and exclude merger/acquisition and integration and restructuring charges in the both the current and prior year quarters.

Military

Net sales for Military increased $3.1 million, or 0.6%, to $514.1 million from $511.0 million in the prior year quarter due to incremental net sales of $33.4 million from the 53rd week. In addition to the 53rd week, growth in private label and export sales were more than offset by the impact of domestic base access and commissary shopping restrictions associated with COVID-19, which have led to significant declines in Defense Commissary Agency sales as a whole.

The reported operating loss for Military was $0.5 million compared to $3.5 million in the prior year quarter. The change was driven by improvements in gross margin and supply chain expense rates. The adjusted operating loss(1) in the Military segment was $0.4 million compared to a $3.5 million loss in the prior year.

Fiscal Year 2020 Results

Consolidated net sales for the fiscal year ended January 2, 2021 increased $812.4 million, or 9.5%, to $9.35 billion from $8.54 billion in the prior fiscal year, with the inclusion of the 53rd week contributing $158.9 million to consolidated net sales. The remaining increase in net sales was generated by continued growth with existing Food Distribution customers as well as increased consumer demand associated with the COVID-19 pandemic in the Retail and Food Distribution segments, partially offset by the exit of the Company's Fresh Production operations and lower comparable sales for the Military segment.

The Company reported earnings from continuing operations for fiscal 2020 of $75.9 million, or $2.12 per diluted share, compared to $5.9 million, or $0.16 per diluted share, in the prior year. The increase was primarily attributable to increased sales volume, improved margin rates, cycling prior year pension termination charges, and tax benefits associated with the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, partially offset by an increase in incentive compensation due to improved overall Company performance, supply chain expense rates, restructuring and asset impairment charges, as well as additional compensation for frontline workers and sanitation measures associated with COVID-19. Adjusted earnings from continuing operations(2) for fiscal 2020 were $90.8 million, or $2.53 per diluted share, compared to $39.9 million, or $1.10 per diluted share, in the prior year. Fiscal 2020 adjusted earnings exclude $14.9 million of net after-tax charges related to restructuring and asset impairments, integration costs, severance, and tax benefits associated with the CARES Act. Fiscal 2019 adjusted earnings from continuing operations exclude $34.0 million of net after-tax charges primarily related to pension termination expense, asset impairment charges, one-time costs associated with Project One Team and losses from the Fresh Kitchen operations subsequent to the decision to exit the business.

Adjusted EBITDA(3) for fiscal 2020 was $239.1 million, or 2.6% of net sales, compared to $177.9 million, or 2.1% of net sales, in fiscal 2019.

Balance Sheet and Cash Flow

Cash flows provided by operating activities for fiscal 2020 were $306.7 million compared to $180.2 million in the prior year, due to increased profitability and reductions in operating assets and liabilities. In 2020, the Company generated $239.4 million in free cash flow(4), compared to $105.4 million in the prior year. As a result of this improved cash generation, the Company was able to reduce its net long-term debt(5) by $197.8 million during fiscal 2020. The reduction in net long-term debt, combined with the Company's increased profitability, resulted in an improvement in the Company's net long-term debt to adjusted EBITDA ratio over this period of time from 3.7x to 2.0x.

Capital expenditures and IT capital(6) totaled $78.9 million for fiscal 2020 compared to $74.8 million in the prior year.

For fiscal 2020, the Company declared $27.7 million in quarterly cash dividends equal to $0.1925 per common share. The Company also repurchased 860,752 shares for a total of $10.0 million at an average price of $11.62 per share.

Outlook

"Fiscal 2021 will present a new environment where we expect to see a change in consumer behavior," continued Tony Sarsam, President and Chief Executive Officer. "While we expect this may create softness in our industry as a whole, we will look to retain our customer base which has grown during the pandemic. We will also shift our focus to prioritize investments into our future. This will include operational spending to invest in our people and processes in connection with our priorities for the coming year. These priorities include sustaining improvements in gross margin and service levels, enhancing the customer experience through our private brand offerings, and improving our associate experience through initiatives related to safety and retention."

The following table provides the Company's guidance for 2021:

53 Week 52 Week

Fiscal Fiscal 2021 Guidance 2020

Actual Low High

Total net sales (millions) $ 9,348 $ 8,800 $ 9,000

Adjusted EBITDA^(3) (millions) $ 239 $ 195 $ 210

Adjusted EPS^(7) $ 2.53 $ 1.65 $ 1.80

Reported EPS $ 2.12 $ 1.48 $ 1.67

Capital expenditures and IT capital^ $ 78,932 $ 80,000 $ 90,000 (6) (thousands)

Depreciation and amortization $ 89,876 $ 90,000 $ 100,000 (thousands)

Interest expense (thousands) $ 14,418 $ 14,000 $ 15,000

Income tax rate 11.1 % 23.0 % 24.5 %

As SpartanNash cycles the impact of the onset of the COVID-19 pandemic in the first quarter of fiscal 2021, the Company currently expects that Retail comparable sales will be negative 7.0% to 9.0% in the first quarter, with fiscal 2021 full year comparable sales of negative 6.0% to 8.0%. Food Distribution sales are expected to decline 1.0% to 3.0% in fiscal 2021, while Military Distribution sales are expected to decline 3.0% to 5.0% in 2021.

Conference Call

A telephone conference call to discuss the Company's fourth quarter and fiscal 2020 financial results is scheduled for Thursday, February 25, 2021 at 8:00 a.m. ET. A live webcast of this conference call will be available on the Company's website, www.spartannash.com/webcasts. Simply click on "For Investors" and follow the links to the live webcast. The webcast will remain available for replay on the Company's website for approximately ten days.

About SpartanNash

SpartanNash (Nasdaq: SPTN) is a Fortune 400 company whose core businesses include distributing grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores and U.S. military commissaries and exchanges; as well as operating a premier fresh produce distribution network. SpartanNash serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar and Djibouti. SpartanNash currently operates 154 supermarkets, primarily under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery and Dan's Supermarket. Through its MDV military division, SpartanNash is a leading distributor of grocery products to U.S. military commissaries.

Forward-Looking Statements

This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words "outlook," "believe," "anticipates," "continue," "expects," "guidance," "trend," "on track," "encouraged" or "plan" or similar expressions. The statements in the "Outlook" section of this press release are inherently forward looking. Forward-looking statements relating to expectations about future results or events are based upon information available to SpartanNash as of today's date, and are not guarantees of the future performance of the Company, and actual results may vary materially from the results and expectations discussed. Additional risks and uncertainties include, but are not limited to, disruption associated with the COVID-19 pandemic and the Company's ability to compete in the highly competitive grocery distribution, retail grocery, and military distribution industries. Additional information concerning these and other risks is contained in SpartanNash's most recently filed Annual Report on Form 10-K, recent Current Reports on Form 8-K and other SEC filings. All subsequent written and oral forward-looking statements concerning SpartanNash, or other matters and attributable to SpartanNash or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. SpartanNash does not undertake any obligation to publicly update any of these forward-looking statements to reflect events or circumstances that may arise after the date hereof.

(1) A reconciliation of operating earnings to adjusted operating earnings, a non-GAAP financial measure, is provided in Table 3 below. (2) A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations, a non-GAAP financial measure, is provided in Table 4 below. (3) A reconciliation of net earnings to Adjusted EBITDA, a non-GAAP financial measure, is provided in Table 2 below. (4) A reconciliation of net cash provided by operating activities to free cash flow, a non-GAAP financial measure, is provided in Table 6 below. (5) A reconciliation of long-term debt and finance lease obligations to net long-term debt, a non-GAAP financial measure, is provided in Table 5 below. (6) A reconciliation of purchases of property and equipment to capital expenditures and IT capital, a non-GAAP financial measure, is provided in Table 7 below. (7) A reconciliation of projected earnings per share from continuing operations to adjusted earnings per share from continuing operations, a non-GAAP financial measure, is provided in Table 8 below.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

13 and 12 Weeks Ended 53 and 52 Weeks Ended

January 2, December 28, January 2, December 28,

(In thousands,except per 2021 2019 2021 2019 share amounts)

Net sales $ 2,247,112 $ 1,997,953 $ 9,348,485 $ 8,536,065

Cost of sales 1,908,910 1,711,220 7,923,520 7,292,235

Gross profit 338,202 286,733 1,424,965 1,243,830



Operating expenses

Selling,general and 316,674 272,241 1,297,740 1,172,401 administrative

Merger/acquisition 179 73 421 1,437 andintegration

Restructuringcharges and 3,943 2,835 24,398 13,050 assetimpairment

Totaloperating 320,796 275,149 1,322,559 1,186,888 expenses



Operating 17,406 11,584 102,406 56,942 earnings



Other expenses and (income)

Interest 3,608 6,596 18,418 34,548 expense

Loss on debt - - - 329 extinguishment

Postretirementbenefit (88 ) 126 (685 ) 19,803 (income)expense

Other, net (144 ) (242 ) (691 ) (1,313 )

Total other 3,376 6,480 17,042 53,367 expenses, net



Earningsbefore incometaxes and 14,030 5,104 85,364 3,575 discontinuedoperations

Income taxexpense 1,937 (369 ) 9,450 (2,342 ) (benefit)

Earnings fromcontinuing 12,093 5,473 75,914 5,917 operations



Loss fromdiscontinued - (49 ) - (175 ) operations,net of taxes

Net earnings $ 12,093 $ 5,424 $ 75,914 $ 5,742



Basic earnings per share:

Earnings fromcontinuing $ 0.34 $ 0.15 $ 2.12 $ 0.16 operations

Loss fromdiscontinued - (0.00 ) - (0.00 ) operations

Net earnings $ 0.34 $ 0.15 $ 2.12 $ 0.16



Dilutedearnings per share:

Earnings fromcontinuing $ 0.34 $ 0.15 $ 2.12 $ 0.16 operations

Loss fromdiscontinued - (0.00 ) - (0.00 ) operations

Net earnings $ 0.34 $ 0.15 $ 2.12 $ 0.16





Weightedaverage shares outstanding:

Basic 35,742 36,351 35,861 36,271

Diluted 35,807 36,351 35,862 36,271



SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

January 2,

December 28,

(In thousands)

2021

2019

Assets

Current assets

Cash and cash equivalents

$

19,903

$

24,172

Accounts and notes receivable, net

357,564

345,320

Inventories, net

541,785

537,212

Prepaid expenses and other current assets

72,229

58,775

Property and equipment held for sale

23,259

31,203

Total current assets

1,014,740

996,682

Property and equipment, net

577,059

615,816

Goodwill

181,035

181,035

Intangible assets, net

116,142

130,434

Operating lease assets

289,173

268,982

Other assets, net

99,242

82,660

Total assets

$

2,277,391

$

2,275,609

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable

$

464,784

$

405,370

Accrued payroll and benefits

113,789

59,680

Other accrued expenses

60,060

51,295

Current portion of operating lease liabilities

45,786

42,440

Current portion of long-term debt and finance lease liabilities

5,135

6,349

Total current liabilities

689,554

565,134

Long-term liabilities

Deferred income taxes

45,728

43,111

Operating lease liabilities

278,859

267,350

Other long-term liabilities

46,892

30,272

Long-term debt and finance lease liabilities

481,309

682,204

Total long-term liabilities

852,788

1,022,937

Commitments and contingencies

Shareholders' equity

Common stock, voting, no par value; 100,000 shares authorized; 35,851 and 36,351 shares outstanding

491,819

490,233

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

-

-

Accumulated other comprehensive loss

(2,276

)

(1,600

)

Retained earnings

245,506

198,905

Total shareholders' equity

735,049

687,538

Total liabilities and shareholders' equity

$

2,277,391

$

2,275,609

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

January 2, December 28,

(In thousands) 2021 2019

Assets

Current assets

Cash and cash equivalents $ 19,903 $ 24,172

Accounts and notes receivable, net 357,564 345,320

Inventories, net 541,785 537,212

Prepaid expenses and other current assets 72,229 58,775

Property and equipment held for sale 23,259 31,203

Total current assets 1,014,740 996,682



Property and equipment, net 577,059 615,816

Goodwill 181,035 181,035

Intangible assets, net 116,142 130,434

Operating lease assets 289,173 268,982

Other assets, net 99,242 82,660



Total assets $ 2,277,391 $ 2,275,609



Liabilities and Shareholders' Equity

Current liabilities

Accounts payable $ 464,784 $ 405,370

Accrued payroll and benefits 113,789 59,680

Other accrued expenses 60,060 51,295

Current portion of operating lease liabilities 45,786 42,440

Current portion of long-term debt and finance 5,135 6,349 lease liabilities

Total current liabilities 689,554 565,134



Long-term liabilities

Deferred income taxes 45,728 43,111

Operating lease liabilities 278,859 267,350

Other long-term liabilities 46,892 30,272

Long-term debt and finance lease liabilities 481,309 682,204

Total long-term liabilities 852,788 1,022,937



Commitments and contingencies



Shareholders' equity

Common stock, voting, no par value; 100,000shares 491,819 490,233 authorized; 35,851 and 36,351 sharesoutstanding

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

Accumulated other comprehensive loss (2,276 ) (1,600 )

Retained earnings 245,506 198,905

Total shareholders' equity 735,049 687,538



Total liabilities and shareholders' equity $ 2,277,391 $ 2,275,609



SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

53 and 52 Weeks Ended

(In thousands)

January 2, 2021

December 28, 2019

Cash flow activities

Net cash provided by operating activities

$

306,716

$

180,192

Net cash used in investing activities

(57,221

)

(143,172

)

Net cash used in financing activities

(253,764

)

(31,219

)

Net cash used in discontinued operations

-

(214

)

Net (decrease) increase in cash and cash equivalents

(4,269

)

5,587

Cash and cash equivalents at beginning of the period

24,172

18,585

Cash and cash equivalents at end of the period

$

19,903

$

24,172

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

53 and 52 Weeks Ended

(In thousands) January 2, December 28, 2021 2019

Cash flow activities

Net cash provided by operating $ 306,716 $ 180,192 activities

Net cash used in investing activities (57,221 ) (143,172 )

Net cash used in financing activities (253,764 ) (31,219 )

Net cash used in discontinued operations - (214 )

Net (decrease) increase in cash and cash (4,269 ) 5,587 equivalents

Cash and cash equivalents at beginning 24,172 18,585 of the period

Cash and cash equivalents at end of the $ 19,903 $ 24,172 period

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Sales and Operating Earnings (Loss) by Segment

(Unaudited)

13 and 12 Weeks Ended

53 and 52 Weeks Ended

(In thousands)

January 2, 2021

December 28, 2019

January 2, 2021

December 28, 2019

Food Distribution Segment:

Net sales

$

1,105,617

49.2

%

$

938,941

47.0

%

$

4,577,178

49.0

%

$

3,982,609

46.7

%

Operating earnings

10,972

10,852

45,962

47,416

Retail Segment:

Net sales

627,434

27.9

%

548,002

27.4

%

2,637,917

28.2

%

2,381,349

27.9

%

Operating earnings

6,943

4,242

66,359

18,842

Military Segment:

Net sales

514,061

22.9

%

511,010

25.6

%

2,133,390

22.8

%

2,172,107

25.4

%

Operating loss

(509

)

(3,510

)

(9,915

)

(9,316

)

Total:

Net sales

$

2,247,112

100.0

%

$

1,997,953

100.0

%

$

9,348,485

100.0

%

$

8,536,065

100.0

%

Operating earnings

17,406

11,584

102,406

56,942

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company also provides information regarding adjusted operating earnings, adjusted earnings from continuing operations, and adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), net long-term debt, free cash flow, capital expenditures and IT capital, and projected earnings per share from continuing operations. These are non-GAAP financial measures, as defined below, and are used by management to allocate resources, assess performance against its peers and evaluate overall performance. The Company believes these measures provide useful information for both management and its investors. The Company believes these non-GAAP measures are useful to investors because they provide additional understanding of the trends and special circumstances that affect its business. These measures provide useful supplemental information that helps investors to establish a basis for expected performance and the ability to evaluate actual results against that expectation. The measures, when considered in connection with GAAP results, can be used to assess the overall performance of the Company as well as assess the Company's performance against its peers. These measures are also used as a basis for certain compensation programs sponsored by the Company. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its financial results in these adjusted formats.

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude "Fresh Cut operating losses" subsequent to the decision to exit these operations during the first quarter, severance associated with cost reduction initiatives, organizational alignment costs, 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. Adjusted earnings from continuing operations exclude pension termination income related to refunds from the annuity provider associated with the final reconciliation of participant data, as well as net tax benefits associated with the CARES Act. Prior year adjusted operating earnings, adjusted earnings from continuing operations and adjusted EBITDA exclude "Fresh Kitchen operating losses" subsequent to the decision to exit these operations at the beginning of the third quarter, costs associated with organizational realignment, which include significant changes to the Company's management team, 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 costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings. These measures were adjusted for the impact of the 53rd week in 2020 to provide better comparability to prior years.

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Sales and Operating Earnings (Loss) by Segment

(Unaudited)

13 and 12 Weeks Ended 53 and 52 Weeks Ended

(In thousands) January 2, 2021 December 28, 2019 January 2, 2021 December 28, 2019

Food Distribution Segment:

Net sales $ 1,105,617 49.2 % $ 938,941 47.0 % $ 4,577,178 49.0 % $ 3,982,609 46.7 %

Operating earnings 10,972 10,852 45,962 47,416

Retail Segment:

Net sales 627,434 27.9 % 548,002 27.4 % 2,637,917 28.2 % 2,381,349 27.9 %

Operating earnings 6,943 4,242 66,359 18,842

Military Segment:

Net sales 514,061 22.9 % 511,010 25.6 % 2,133,390 22.8 % 2,172,107 25.4 %

Operating loss (509 ) (3,510 ) (9,915 ) (9,316 )

Total:

Net sales $ 2,247,112 100.0 % $ 1,997,953 100.0 % $ 9,348,485 100.0 % $ 8,536,065 100.0 %

Operating earnings 17,406 11,584 102,406 56,942

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company also provides information regarding adjusted operating earnings, adjusted earnings from continuing operations, and adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), net long-term debt, free cash flow, capital expenditures and IT capital, and projected earnings per share from continuing operations. These are non-GAAP financial measures, as defined below, and are used by management to allocate resources, assess performance against its peers and evaluate overall performance. The Company believes these measures provide useful information for both management and its investors. The Company believes these non-GAAP measures are useful to investors because they provide additional understanding of the trends and special circumstances that affect its business. These measures provide useful supplemental information that helps investors to establish a basis for expected performance and the ability to evaluate actual results against that expectation. The measures, when considered in connection with GAAP results, can be used to assess the overall performance of the Company as well as assess the Company's performance against its peers. These measures are also used as a basis for certain compensation programs sponsored by the Company. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its financial results in these adjusted formats.

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude "Fresh Cut operating losses" subsequent to the decision to exit these operations during the first quarter, severance associated with cost reduction initiatives, organizational alignment costs, 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. Adjusted earnings from continuing operations exclude pension termination income related to refunds from the annuity provider associated with the final reconciliation of participant data, as well as net tax benefits associated with the CARES Act. Prior year adjusted operating earnings, adjusted earnings from continuing operations and adjusted EBITDA exclude "Fresh Kitchen operating losses" subsequent to the decision to exit these operations at the beginning of the third quarter, costs associated with organizational realignment, which include significant changes to the Company's management team, 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 costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings. These measures were adjusted for the impact of the 53rd week in 2020 to provide better comparability to prior years.

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

13 and 12 Weeks Ended 53 and 52 Weeks Ended

(In thousands) January 2, December January 2, December 2021 28, 2019 2021 28, 2019

Net earnings $ 12,093 $ 5,424 $ 75,914 $ 5,742

Earnings fromdiscontinued - 49 - 175 operations, net oftax

Income tax expense 1,937 (369 ) 9,450 (2,342 )(benefit)

Other expenses, net 3,376 6,480 17,042 53,367

Operating earnings 17,406 11,584 102,406 56,942

Adjustments:

LIFO (gain) expense (982 ) 2,131 2,176 5,892

Depreciation and 20,893 20,353 89,504 87,866 amortization

Merger/acquisition 179 73 421 1,437 and integration

Restructuring,asset impairment 3,943 2,835 24,398 13,050 and other charges

Fresh Kitchen - 690 - 2,894 operating losses

Fresh Cut operating - - 2,262 - losses

Stock-based 1,084 578 6,265 7,313 compensation

Stock warrants 6,549 - 6,549 -

Non-cash rent (752 ) (1,080 ) (4,733 ) (5,622 )

Costs associatedwith Project One - - 493 5,428 Team

Organizational 455 - 455 1,812 realignment costs

Severanceassociated with 33 - 5,154 - cost reductioninitiatives

(Gain) loss on (132 ) - 3,330 - disposal of assets

Other non-cash 186 223 379 933 charges

Adjusted EBITDA 48,862 37,387 239,059 177,945

53rd week (4,246 ) - (4,246 ) -

Adjusted EBITDA, $ 44,616 $ 37,387 $ 234,813 $ 177,945 excluding 53rd week

Food Distribution:

Operating earnings $ 10,972 $ 10,852 $ 45,962 $ 47,416

Adjustments:

LIFO (gain) expense (829 ) 1,163 855 3,032

Depreciation and 7,356 7,493 31,917 32,861 amortization

Merger/acquisition - 8 - (122 )and integration

Restructuring,asset impairment 1,863 4,120 21,085 14,844 and other charges

Fresh Kitchen - 690 - 2,894 operating losses

Fresh Cut operating - - 2,262 - losses

Stock-based 552 284 3,076 3,603 compensation

Stock warrants 6,549 - 6,549 -

Non-cash rent 433 129 558 482

Costs associatedwith Project One - - 265 2,877 Team

Organizational 245 - 245 960 realignment costs

(Gain) loss on (131 ) - 1,482 - disposal of assets

Severanceassociated with 13 - 3,156 - cost reductioninitiatives

Other non-cash 101 3 204 394 charges

Adjusted EBITDA 27,124 24,742 117,616 109,241

53rd week (1,363 ) - (1,363 ) -

Adjusted EBITDA, $ 25,761 $ 24,742 $ 116,253 $ 109,241 excluding 53rd week

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

(In thousands)

January 2, 2021

December 28, 2019

January 2, 2021

December 28, 2019

Retail:

Operating earnings

$

6,943

$

4,242

$

66,359

$

18,842

Adjustments:

LIFO (gain) expense

(285

)

213

301

1,071

Depreciation and amortization

10,629

10,123

45,199

43,171

Merger/acquisition and integration

179

65

421

1,559

Restructuring charges (gains) and asset impairment

2,080

(1,285

)

3,313

(1,794

)

Stock-based compensation

378

205

2,134

2,530

Non-cash rent

(1,097

)

(1,118

)

(4,915

)

(5,730

)

Costs associated with Project One Team

-

-

164

1,845

Organizational realignment costs

151

-

151

616

Severance associated with cost reduction initiatives

4

-

1,445

-

Loss on disposal of assets

41

-

1,946

-

Other non-cash charges

60

218

124

628

Adjusted EBITDA

19,083

12,663

116,642

62,738

53rd week

(2,780

)

-

(2,780

)

-

Adjusted EBITDA, excluding 53rd week

$

16,303

$

12,663

$

113,862

$

62,738

Military:

Operating loss

$

(509

)

$

(3,510

)

$

(9,915

)

$

(9,316

)

Adjustments:

LIFO expense

132

755

1,020

1,789

Depreciation and amortization

2,908

2,737

12,388

11,834

Stock-based compensation

154

89

1,055

1,180

Non-cash rent

(88

)

(91

)

(376

)

(374

)

Costs associated with Project One Team

-

-

64

706

Organizational realignment costs

59

-

59

236

Severance associated with cost reduction initiatives

16

-

553

-

Gain on disposal of assets

(42

)

-

(98

)

-

Other non-cash charges (gains)

25

2

51

(89

)

Adjusted EBITDA

2,655

(18

)

4,801

5,966

53rd week

(103

)

-

(103

)

-

Adjusted EBITDA, excluding 53rd week

$

2,552

$

(18

)

$

4,698

$

5,966

Notes: 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 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.

Adjusted EBITDA and adjusted EBITDA by segment are not measures of performance under accounting principles generally accepted in the United States of America and should not be considered as a substitute for net earnings 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.

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

(In thousands) January 2, December January 2, December 2021 28, 2019 2021 28, 2019

Retail:

Operating earnings $ 6,943 $ 4,242 $ 66,359 $ 18,842

Adjustments:

LIFO (gain) expense (285 ) 213 301 1,071

Depreciation and 10,629 10,123 45,199 43,171 amortization

Merger/acquisition 179 65 421 1,559 and integration

Restructuringcharges (gains) and 2,080 (1,285 ) 3,313 (1,794 )asset impairment

Stock-based 378 205 2,134 2,530 compensation

Non-cash rent (1,097 ) (1,118 ) (4,915 ) (5,730 )

Costs associatedwith Project One - - 164 1,845 Team

Organizational 151 - 151 616 realignment costs

Severance associatedwith cost reduction 4 - 1,445 - initiatives

Loss on disposal of 41 - 1,946 - assets

Other non-cash 60 218 124 628 charges

Adjusted EBITDA 19,083 12,663 116,642 62,738

53rd week (2,780 ) - (2,780 ) -

Adjusted EBITDA, $ 16,303 $ 12,663 $ 113,862 $ 62,738 excluding 53rd week

Military:

Operating loss $ (509 ) $ (3,510 ) $ (9,915 ) $ (9,316 )

Adjustments:

LIFO expense 132 755 1,020 1,789

Depreciation and 2,908 2,737 12,388 11,834 amortization

Stock-based 154 89 1,055 1,180 compensation

Non-cash rent (88 ) (91 ) (376 ) (374 )

Costs associatedwith Project One - - 64 706 Team

Organizational 59 - 59 236 realignment costs

Severance associatedwith cost reduction 16 - 553 - initiatives

Gain on disposal of (42 ) - (98 ) - assets

Other non-cash 25 2 51 (89 )charges (gains)

Adjusted EBITDA 2,655 (18 ) 4,801 5,966

53rd week (103 ) - (103 ) -

Adjusted EBITDA, $ 2,552 $ (18 ) $ 4,698 $ 5,966 excluding 53rd week

Notes: 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 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.

Adjusted EBITDA and adjusted EBITDA by segment are not measures of performance under accounting principles generally accepted in the United States of America and should not be considered as a substitute for net earnings 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.

Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings

(A Non-GAAP Financial Measure)

(Unaudited)

13 and 12 Weeks Ended 53 and 52 Weeks Ended

(In thousands) January 2, December January 2, December 2021 28, 2019 2021 28, 2019

Operating earnings $ 17,406 $ 11,584 $ 102,406 $ 56,942

Adjustments:

Merger/acquisition 179 73 421 1,437 and integration

Restructuring, asset 3,943 2,835 24,398 13,050 impairment and other

Fresh Kitchen - 690 - 2,894 operating losses

Expenses associatedwith tax planning - - 82 - strategies

Costs associatedwith Project One - - 493 5,428 Team

Organizational 455 - 455 1,812 realignment costs

Pension termination - 13 - 59

Severance associatedwith cost reduction 33 24 5,154 509 initiatives

Fresh Cut operating - - 2,262 - losses

Adjusted operating 22,016 15,219 135,671 82,131 earnings

53rd week (4,155 ) - (4,155 ) -

Adjusted operatingearnings, excluding $ 17,861 $ 15,219 $ 131,516 $ 82,131 53rd week

Reconciliation of operating earnings (loss) to adjusted operating earnings (loss) by segment:

13 and 12 Weeks Ended

53 and 52 Weeks Ended

January 2, 2021

December 28, 2019

January 2, 2021

December 28, 2019

Food Distribution:

Operating earnings

$

10,972

$

10,852

$

45,962

$

47,416

Adjustments:

Merger/acquisition and integration

-

8

-

(122

)

Restructuring, asset impairment and other charges

1,863

4,120

21,085

14,844

Fresh Kitchen operating losses

-

690

-

2,894

Expenses associated with tax planning strategies

-

-

44

-

Costs associated with Project One Team

-

-

265

2,877

Organizational realignment costs

245

-

245

960

Pension termination

-

6

-

32

Severance associated with cost reduction initiatives

13

21

3,156

413

Fresh Cut operating losses

-

-

2,262

-

Adjusted operating earnings

13,093

15,697

73,019

69,314

53rd week

(1,300

)

-

(1,300

)

-

Adjusted operating earnings, excluding 53rd week

$

11,793

$

15,697

$

71,719

$

69,314

Retail:

Operating earnings

6,943

4,242

66,359

18,842

Adjustments:

Merger/acquisition and integration

179

65

421

1,559

Restructuring, asset impairment and other charges (gains)

2,080

(1,285

)

3,313

(1,794

)

Costs associated with Project One Team

-

-

164

1,845

Organizational realignment costs

151

-

151

616

Expenses associated with tax planning strategies

-

-

27

-

Pension termination

-

4

-

21

Severance associated with cost reduction initiatives

4

3

1,445

86

Adjusted operating earnings

9,357

3,029

71,880

21,175

53rd week

(2,760

)

-

(2,760

)

-

Adjusted operating earnings, excluding 53rd week

$

6,597

$

3,029

$

69,120

$

21,175

Military:

Operating loss

$

(509

)

$

(3,510

)

$

(9,915

)

$

(9,316

)

Adjustments:

Costs associated with Project One Team

-

-

64

706

Organizational realignment costs

59

-

59

236

Expenses associated with tax planning strategies

-

-

11

-

Pension termination

-

3

-

6

Severance associated with cost reduction initiatives

16

-

553

10

Adjusted operating loss

(434

)

(3,507

)

(9,228

)

(8,358

)

53rd week

(95

)

-

(95

)

-

Adjusted operating loss, excluding 53rd week

$

(529

)

$

(3,507

)

$

(9,323

)

$

(8,358

)

Notes: 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.

Adjusted operating earnings is not a measure of performance under GAAP and should not be considered as a substitute for operating earnings, and other income statement data. The Company's definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.

Reconciliation of operating earnings (loss) to adjusted operating earnings (loss) by segment:

13 and 12 Weeks Ended 53 and 52 Weeks Ended

January 2, December January 2, December 2021 28, 2019 2021 28, 2019

Food Distribution:

Operating earnings $ 10,972 $ 10,852 $ 45,962 $ 47,416

Adjustments:

Merger/acquisition - 8 - (122 )and integration

Restructuring, assetimpairment and other 1,863 4,120 21,085 14,844 charges

Fresh Kitchen - 690 - 2,894 operating losses

Expenses associatedwith tax planning - - 44 - strategies

Costs associated with - - 265 2,877 Project One Team

Organizational 245 - 245 960 realignment costs

Pension termination - 6 - 32

Severance associatedwith cost reduction 13 21 3,156 413 initiatives

Fresh Cut operating - - 2,262 - losses

Adjusted operating 13,093 15,697 73,019 69,314 earnings

53rd week (1,300 ) - (1,300 ) -

Adjusted operatingearnings, excluding $ 11,793 $ 15,697 $ 71,719 $ 69,314 53rd week

Retail:

Operating earnings 6,943 4,242 66,359 18,842

Adjustments:

Merger/acquisition 179 65 421 1,559 and integration

Restructuring, assetimpairment and other 2,080 (1,285 ) 3,313 (1,794 )charges (gains)

Costs associated with - - 164 1,845 Project One Team

Organizational 151 - 151 616 realignment costs

Expenses associatedwith tax planning - - 27 - strategies

Pension termination - 4 - 21

Severance associatedwith cost reduction 4 3 1,445 86 initiatives

Adjusted operating 9,357 3,029 71,880 21,175 earnings

53rd week (2,760 ) - (2,760 ) -

Adjusted operatingearnings, excluding $ 6,597 $ 3,029 $ 69,120 $ 21,175 53rd week

Military:

Operating loss $ (509 ) $ (3,510 ) $ (9,915 ) $ (9,316 )

Adjustments:

Costs associated with - - 64 706 Project One Team

Organizational 59 - 59 236 realignment costs

Expenses associatedwith tax planning - - 11 - strategies

Pension termination - 3 - 6

Severance associatedwith cost reduction 16 - 553 10 initiatives

Adjusted operating (434 ) (3,507 ) (9,228 ) (8,358 )loss

53rd week (95 ) - (95 ) -

Adjusted operatingloss, excluding 53rd $ (529 ) $ (3,507 ) $ (9,323 ) $ (8,358 )week

Notes: 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.

Adjusted operating earnings is not a measure of performance under GAAP and should not be considered as a substitute for operating earnings, and other income statement data. The Company's definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.

Table 4: Reconciliation of Earnings from Continuing Operations to

Adjusted Earnings from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

13 and 12 Weeks Ended

January 2, 2021 December 28, 2019

per per diluted diluted

(In thousands, except Earnings share Earnings share per share amounts)

Earnings from $ 12,093 $ 0.34 $ 5,473 $ 0.15 continuing operations

Adjustments:

Merger/acquisition 179 73 and integration

Restructuring, assetimpairment and other 3,943 2,835 charges

Fresh Kitchen - 690 operating losses

Organizational 455 - realignment costs

Severance associatedwith cost reduction 33 25 initiatives

Pension termination (189 ) 47

Total adjustments 4,421 3,670

Income tax effect on (1,024 ) (856 ) adjustments (a)

Impact of CARES Act 6 - (b)

Total adjustments, 3,403 0.09 2,814 0.08 net of taxes

Adjusted earningsfrom continuing 15,496 0.43 8,287 0.23 operations

53rd week (2,999 ) (0.08 ) - -

Adjusted earningsfrom continuing $ 12,497 $ 0.35 $ 8,287 $ 0.23 operations, excluding53rd week



53 and 52 Weeks Ended

January 2, 2021 December 28, 2019

per per diluted diluted

(In thousands, except Earnings share Earnings share per share amounts)

Earnings from $ 75,914 $ 2.12 $ 5,917 $ 0.16 continuing operations

Adjustments:

Merger/acquisition 421 1,437 and integration

Restructuring, assetimpairment and other 24,398 13,050 charges

Fresh Kitchen - 2,894 operating losses

Expenses associated 82 - with tax planning

Costs associated with 493 5,428 Project One Team

Organizational 455 1,812 realignment costs

Loss on debt - 329 extinguishment

Severance associatedwith cost reduction 5,154 509 initiatives

Fresh Cut operating 2,262 - losses

Pension termination (1,193 ) 19,557

Total adjustments 32,072 45,016

Income tax effect on (7,851 ) (11,022 ) adjustments (a)

Impact of CARES Act (9,292 ) - (b)

Total adjustments, 14,929 0.41 33,994 0.94 net of taxes

Adjusted earningsfrom continuing 90,843 2.53 39,911 1.10 operations

53rd week (2,999 ) (0.08 ) - -

Adjusted earningsfrom continuing $ 87,844 $ 2.45 $ 39,911 $ 1.10 operations, excluding53rd week

(a)The income tax effect on adjustments is computed by applying the applicable tax rate to the adjustments.(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 carrybacks. Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.

Adjusted earnings from continuing operations is not a measure of performance under GAAP and should not be considered as a substitute for earnings from continuing operations and other income statement data. The Company's definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.

(a) The income tax effect on adjustments is computed by applying the applicable tax rate to the adjustments. Represents tax impacts attributable to the Coronavirus Aid, Relief and (b) Economic Security ("CARES") Act, and related tax planning, primarily related to additional deductions and the utilization of net operating loss carrybacks. Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.

Adjusted earnings from continuing operations is not a measure of performance under GAAP and should not be considered as a substitute for earnings from continuing operations and other income statement data. The Company's definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.

Table 5: Reconciliation of Long-Term Debt and Finance Lease Obligations to NetLong-Term Debt

(A Non-GAAP Financial Measure)

(Unaudited)

January 2, December 29,

(In thousands) 2021 2019

Current portion of long-term debt and finance lease $ 5,135 $ 6,349 liabilities

Long-term debt and finance lease liabilities 481,309 682,204

Total debt 486,444 688,553

Cash and cash equivalents (19,903 ) (24,172 )

Net long-term debt $ 466,541 $ 664,381

Notes: Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and finance lease obligations plus current maturities of long-term debt and finance lease obligations less cash and cash equivalents. 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. Net long-term debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

Table 6: Reconciliation of Net Cash Provided by Operating Activities to FreeCash Flow

(A Non-GAAP Financial Measure)

(Unaudited)

53 and 52 Weeks Ended

(In thousands) January 2, December 28, 2021 2019

Net cash provided by operating $ 306,716 $ 180,192 activities

Less:

Purchases of property and equipment 67,298 74,815

Free cash flow $ 239,418 $ 105,377

Notes: Free cash flow is a non-GAAP financial measure calculated by subtracting capital expenditures from cash flows provided by operating activities, the most directly comparable GAAP measure. The Company believes it is a useful indicator of liquidity that provides information to both management and investors about the amount of cash generated from operations that, after capital expenditures, can be used for strategic business objectives, including the repayment of long-term debt. Free cash flow is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

Table 7: Reconciliation of Purchases of Property and Equipment to CapitalExpenditures and IT Capital

(A Non-GAAP Financial Measure)

(Unaudited)

53 and 52 Weeks Ended

(In thousands) January 2, December 28, 2021 2019

Purchases of property and equipment $ 67,298 $ 74,815

Plus:

Cloud computing spend 11,634 -

Capital expenditures and IT capital $ 78,932 $ 74,815

Table 8: Reconciliation of Projected Earnings per Diluted Share from Continuing Operations to

Projected Adjusted Earnings per Diluted Share from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

52 Weeks Ending

January 1, 2022

Low

High

Earnings from continuing operations

$

1.48

$

1.67

Adjustments, net of taxes:

Merger/acquisition and integration expenses

0.01

0.01

Restructuring and asset impairment

0.13

0.10

Severance associated with cost reduction initiatives

0.01

0.01

Organizational realignment

0.02

0.01

Adjusted earnings from continuing operations

$

1.65

$

1.80

View source version on businesswire.com: https://www.businesswire.com/news/home/20210224005996/en/

CONTACT: Investors: Mark Shamber Chief Financial Officer and Executive Vice President (616) 878-8023 Chris Mandeville ICR (203) 682-8304 Anna Kate Heller ICR (678) 358-8995 Media: Meredith Gremel Vice President Corporate Affairs and Communications (616) 878-2830