Business Wire | Aug 18, 2021 04:15PM EDT

SpartanNash Announces Second Quarter Fiscal 2021 Financial Results

Aug. 18, 2021

GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Aug. 18, 2021--SpartanNash Company (the "Company") (Nasdaq: SPTN) today reported financial results for its 12-week second quarter ended July 17, 2021.

Second Quarter Fiscal 2021 Highlights

* Net sales of $2.11 billion declined 3.6% from prior year quarter net sales of $2.18 billion, due to the prior year's increased consumer demand related to the COVID-19 pandemic. * Retail comparable store sales declined 2.7% for the quarter. Comparable store sales increased by 12.1% on a two-year basis, representing sequential improvement on a quarterly basis. * EPS was $0.47 per share and adjusted EPS was $0.54. * Adjusted EBITDA was $54.4 million, compared to $59.2 million in the prior year quarter. * Cash generated from operating activities of $105.4 million during the second quarter, leading to a $75.8 million net pay down of long-term debt. * The Company increased the low end of the fiscal 2021 profitability outlook range. EPS is now expected to range from $1.56 to $1.69 per diluted share, with adjusted EPS expected to range from $1.70 to $1.80 per diluted share, and adjusted EBITDA to range from $200 to $210 million.

"I am pleased to report strong second quarter results, in spite of continued labor and supply chain headwinds that have been observed throughout the industry," said SpartanNash President and CEO Tony Sarsam. "Our associates again rose to the challenge to best support both our wholesale customers and communities we serve."

Consolidated Financial Results

Consolidated net sales for the second quarter decreased $77.5 million, or 3.6%, to $2.11 billion from $2.18 billion in the prior year quarter. The decrease in net sales was due to favorable prior year sales, attributable to increased consumer demand related to the COVID-19 pandemic in all segments. This decline was partly offset by continued growth with certain existing Food Distribution customers. Foot traffic at commissaries within the Military segment has yet to return to pre-pandemic levels following domestic base access restrictions.

Gross profit for the second quarter was $333.6 million, or 15.8% of net sales, compared to $338.4 million, or 15.5% of net sales, in the prior year quarter. Gross profit rate growth was driven by improvements within the Food Distribution and Military segments, as well as an increase in the proportion of margin accretive Retail and Food Distribution segment sales, partially offset by an increase in LIFO expense.

Reported operating expenses for the second quarter were $307.7 million, or 14.6% of net sales, compared to $304.4 million, or 13.9% 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 a higher rate of supply chain expenses primarily in the Food Distribution segment and increases in health insurance expense. These increases in expense rates were partially offset by lower incentive compensation expense compared to the prior year quarter.

The Company reported operating earnings of $25.9 million, compared to $34.0 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 $29.3 million compared to $37.7 million in the prior year quarter and were adjusted for the items detailed in Table 3.

Interest expense decreased $0.4 million from the prior year quarter due to the Company's paydown of long-term debt resulting from free cash flow(4) over the past year.

The Company reported net earnings of $16.8 million, or $0.47 per diluted share, compared to $28.5 million, or $0.80 per diluted share in the prior year quarter. The decline reflects the operating earnings and non-operating expense changes noted above, in addition to cycling a prior year tax benefit of $5.2 million related to the Coronavirus Aid, Relief and Economic Security ("CARES") Act. Adjusted earnings from continuing operations(2) for the second quarter were $19.4 million, or $0.54 per diluted share, compared to $26.1 million, or $0.73 per diluted share in the prior year quarter. A reconciliation of net earnings to adjusted earnings from continuing operations is included in Table 4.

Adjusted EBITDA(3) decreased $4.8 million to $54.4 million, compared to $59.2 million in the prior year quarter, due to the changes in adjusted operating earnings mentioned above. Increases in LIFO expense and depreciation and amortization, which were offset by changes in the timing of restricted stock awards, impacted the relationship between net earnings and adjusted EBITDA for the quarter.

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 decreased $33.3 million, or 3.1%, to $1.06 billion from $1.09 billion in the prior year quarter. The decrease in net sales was due to favorable prior year sales attributable to increased consumer demand related to COVID-19, partly offset by continued growth with certain existing Food Distribution customers. Net sales increased $121.1 million, or 13.0%, over the second quarter of 2019.

Reported operating earnings for Food Distribution were $16.7 million, compared to $14.4 million in the prior year quarter. The increase in reported operating earnings for Food Distribution was due to favorable margin rates and lower asset impairment and restructuring charges, partly offset by a higher rate of supply chain expenses and lower sales volumes. Adjusted operating earnings(1) were $17.4 million, compared to $17.9 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges in both the current and prior year quarters.

Retail

Net sales for Retail decreased $11.3 million, or 1.8%, to $620.0 million from $631.3 million in the prior year quarter, primarily due to favorable prior year sales attributable to increased consumer demand related to COVID-19, partially offset by an increase in fuel sales. Retail comparable store sales declined 2.7% for the quarter, however increased by 12.1% on a two-year comparable basis.

Reported operating earnings for Retail were $12.7 million, compared to $24.5 million in the prior year quarter. The decrease in reported operating earnings was due to reduced fuel margin rates, a decrease in sales volume, higher healthcare expenses, and higher asset impairment and restructuring charges, partially offset by lower incentive compensation expense. Adjusted operating earnings(1) were $15.4 million, compared to $24.7 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges in both the current and prior year quarters.

Military

Net sales for Military decreased $32.9 million, or 7.1%, to $430.1 million from $463.0 million in the prior year quarter. The decrease was primarily related to the continuation of lower volumes at domestic commissaries due to limited base access. Net sales decreased $60.5 million, or 12.3% from the second quarter of 2019.

The reported and adjusted operating losses(1) for Military were $3.5 million, compared to $4.9 million in the prior year quarter. The decrease in the reported and adjusted operating losses was due to improvements in gross margin rates, partially offset by the decrease in sales volume.

Balance Sheet and Cash Flow

Cash flows provided by operating activities for the first half of fiscal 2021 were $73.6 million compared to $198.2 million in the prior year. In the prior year, significant increases in sales volume related to the COVID-19 pandemic resulted in a reduction in working capital and incremental earnings, which benefited prior year operating cash flows. The Company reduced net long-term debt(5) by $39.4 million during the first half of fiscal 2021, which resulted in an improvement in the Company's net long-term debt to adjusted EBITDA ratio over this period from 2.0x to 1.9x.

Capital expenditures and IT capital(6) totaled $43.8 million in the first half of fiscal 2021 compared to $35.6 million in the first half of the prior year.

During the first half of fiscal 2021, the Company declared $14.4 million in cash dividends, equal to $0.20 per common share. The Company also repurchased 265,000 shares for a total of $5.3 million in the first half of fiscal 2021, an average price of $20.07 per share.

Outlook

"We have sustained momentum in our Retail business, though we still face clear challenges in our distribution operations, especially considering the evolving conditions associated with the COVID-19 pandemic. Our updated outlook reflects the improved trends in Retail, but also recognizes the headwinds related to sales trends in our Military business and strains on our supply chain that have been significantly impacted by historic labor shortages," Sarsam continued. "Following the recent announcement of our supply chain transformation initiative, our team has completed the blueprint phase and begun work in areas that will best position us for sustainable, profitable growth and will enhance shareholder returns."

Based on year-to-date performance and our expectations for the remainder of the year, the Company is updating its full year guidance for 2021, initially provided on Feb. 24, 2021:

Previous Full Year 2021 Updated Full Year 2021 Outlook Outlook

Low High Low High

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

Segment sales % decline

Retail comp sales (7.0%) (5.0%) (5.0%) (2.0%)

Food Distribution (3.0%) (1.0%) (3.0%) (1.0%) sales

Military sales (10.0%) (6.0%) (13.0%) (9.0%)

Adjusted EBITDA^(3) $ 195 $ 210 $ 200 $ 210 (millions)

Adjusted EPS^(7) $ 1.65 $ 1.80 $ 1.70 $ 1.80

Reported EPS $ 1.48 $ 1.67 $ 1.56 $ 1.69

Capitalexpenditures and IT $ 80,000 $ 90,000 $ 80,000 $ 90,000 capital^(6)(thousands)

Depreciation andamortization $ 90,000 $ 100,000 $ 90,000 $ 100,000 (thousands)

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

Income tax rate 23.0% 24.5% 24.5% 25.5%

The Company's outlook now includes the costs and expected current year benefits associated with the supply chain transformation initiative.

Conference Call

A telephone conference call to discuss the Company's second quarter financial results is scheduled for Thursday, August 19, 2021 at 8 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 10 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 148 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 net earnings 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS(Unaudited)

12 Weeks Ended 28 Weeks Ended

July 17, July 11, July 17, July 11,

(In thousands,except per 2021 2020 2021 2020 share amounts)

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 304,248 300,727 692,185 692,027 administrative

Acquisitionand 121 - 180 - integration

Restructuringand asset 3,337 3,675 3,176 13,912 impairment,net

Totaloperating 307,706 304,402 695,541 705,939 expenses



Operating 25,921 33,972 56,116 56,002 earnings



Other expenses and (income)

Interest 3,267 3,650 7,856 11,288 expense

Other, net (10 ) (63 ) (276 ) (1,104 )

Total other 3,257 3,587 7,580 10,184 expenses, net



Earningsbefore income 22,664 30,385 48,536 45,818 taxes

Income tax 5,850 1,918 12,206 1,949 expense

Net earnings $ 16,814 $ 28,467 $ 36,330 $ 43,869



Basic netearnings per $ 0.47 $ 0.80 $ 1.02 $ 1.22 share:



Diluted netearnings per $ 0.47 $ 0.80 $ 1.01 $ 1.22 share:



Weightedaverage shares outstanding:

Basic 35,693 35,706 35,734 35,972

Diluted 35,890 35,707 35,890 35,973



SPARTANNASH COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)

July 17,

January 2,

(In thousands)

2021

2021

Assets

Current assets

Cash and cash equivalents

$

24,136

$

19,903

Accounts and notes receivable, net

370,669

357,564

Inventories, net

538,494

541,785

Prepaid expenses and other current assets

59,621

72,229

Property and equipment held for sale

-

23,259

Total current assets

992,920

1,014,740

Property and equipment, net

567,043

577,059

Goodwill

181,035

181,035

Intangible assets, net

113,335

116,142

Operating lease assets

264,231

289,173

Other assets, net

90,583

99,242

Total assets

$

2,209,147

$

2,277,391

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable

$

441,888

$

464,784

Accrued payroll and benefits

90,398

113,789

Other accrued expenses

65,822

60,060

Current portion of operating lease liabilities

44,720

45,786

Current portion of long-term debt and finance lease liabilities

5,719

5,135

Total current liabilities

648,547

689,554

Long-term liabilities

Deferred income taxes

54,442

45,728

Operating lease liabilities

254,114

278,859

Other long-term liabilities

50,294

46,892

Long-term debt and finance lease liabilities

445,574

481,309

Total long-term liabilities

804,424

852,788

Commitments and contingencies

Shareholders' equity

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; no shares outstanding

-

-

Accumulated other comprehensive loss

(2,175

)

(2,276

)

Retained earnings

267,481

245,506

Total shareholders' equity

756,176

735,049

Total liabilities and shareholders' equity

$

2,209,147

$

2,277,391

SPARTANNASH COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)

July 17, January 2,

(In thousands) 2021 2021

Assets

Current assets

Cash and cash equivalents $ 24,136 $ 19,903

Accounts and notes receivable, net 370,669 357,564

Inventories, net 538,494 541,785

Prepaid expenses and other current assets 59,621 72,229

Property and equipment held for sale - 23,259

Total current assets 992,920 1,014,740



Property and equipment, net 567,043 577,059

Goodwill 181,035 181,035

Intangible assets, net 113,335 116,142

Operating lease assets 264,231 289,173

Other assets, net 90,583 99,242



Total assets $ 2,209,147 $ 2,277,391



Liabilities and Shareholders' Equity

Current liabilities

Accounts payable $ 441,888 $ 464,784

Accrued payroll and benefits 90,398 113,789

Other accrued expenses 65,822 60,060

Current portion of operating lease 44,720 45,786 liabilities

Current portion of long-term debt and finance 5,719 5,135 lease liabilities

Total current liabilities 648,547 689,554



Long-term liabilities

Deferred income taxes 54,442 45,728

Operating lease liabilities 254,114 278,859

Other long-term liabilities 50,294 46,892

Long-term debt and finance lease liabilities 445,574 481,309

Total long-term liabilities 804,424 852,788



Commitments and contingencies



Shareholders' equity

Common stock, voting, no par value; 100,000shares authorized; 35,943 and 35,851 shares 490,870 491,819 outstanding

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

Accumulated other comprehensive loss (2,175 ) (2,276 )

Retained earnings 267,481 245,506

Total shareholders' equity 756,176 735,049



Total liabilities and shareholders' equity $ 2,209,147 $ 2,277,391



SPARTANNASH COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

28 Weeks Ended

(In thousands)

July 17, 2021

July 11, 2020

Cash flow activities

Net cash provided by operating activities

$

73,582

$

198,248

Net cash used in investing activities

(10,038

)

(21,844

)

Net cash used in financing activities

(59,311

)

(165,931

)

Net increase in cash and cash equivalents

4,233

10,473

Cash and cash equivalents at beginning of the period

19,903

24,172

Cash and cash equivalents at end of the period

$

24,136

$

34,645

SPARTANNASH COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

28 Weeks Ended

(In thousands) July 17, July 11, 2021 2020

Cash flow activities

Net cash provided by operating activities $ 73,582 $ 198,248

Net cash used in investing activities (10,038 ) (21,844 )

Net cash used in financing activities (59,311 ) (165,931 )

Net increase in cash and cash equivalents 4,233 10,473

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

Cash and cash equivalents at end of the $ 24,136 $ 34,645 period

SPARTANNASH COMPANY AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA Table 1: Net Sales and Operating Earnings (Loss) by Segment(Unaudited)

12 Weeks Ended

28 Weeks Ended

(In thousands)

July 17, 2021

July 11, 2020

July 17, 2021

July 11, 2020

Food Distribution Segment:

Net sales

$

1,056,526

50.2

%

$

1,089,861

49.9

%

$

2,390,608

50.2

%

$

2,459,357

48.8

%

Operating earnings

16,678

14,409

37,824

25,799

Retail Segment:

Net sales

619,977

29.4

%

631,257

28.9

%

1,359,421

28.5

%

1,413,824

28.0

%

Operating earnings

12,711

24,453

26,903

37,098

Military Segment:

Net sales

430,057

20.4

%

462,983

21.2

%

1,014,330

21.3

%

1,167,376

23.2

%

Operating loss

(3,468

)

(4,890

)

(8,611

)

(6,895

)

Total:

Net sales

$

2,106,560

100.0

%

$

2,184,101

100.0

%

$

4,764,359

100.0

%

$

5,040,557

100.0

%

Operating earnings

25,921

33,972

56,116

56,002

Non-GAAP Financial Measures

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

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude 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. Each of these items are considered "non-operational" or "non-core" in nature.

SPARTANNASH COMPANY AND SUBSIDIARIESSUPPLEMENTAL FINANCIAL DATATable 1: Net Sales and Operating Earnings (Loss) by Segment(Unaudited)

12 Weeks Ended 28 Weeks Ended

(In thousands) July 17, 2021 July 11, 2020 July 17, 2021 July 11, 2020

Food Distribution Segment:

Net sales $ 1,056,526 50.2 % $ 1,089,861 49.9 % $ 2,390,608 50.2 % $ 2,459,357 48.8 %

Operating earnings 16,678 14,409 37,824 25,799

Retail Segment:

Net sales 619,977 29.4 % 631,257 28.9 % 1,359,421 28.5 % 1,413,824 28.0 %

Operating earnings 12,711 24,453 26,903 37,098

Military Segment:

Net sales 430,057 20.4 % 462,983 21.2 % 1,014,330 21.3 % 1,167,376 23.2 %

Operating loss (3,468 ) (4,890 ) (8,611 ) (6,895 )

Total:

Net sales $ 2,106,560 100.0 % $ 2,184,101 100.0 % $ 4,764,359 100.0 % $ 5,040,557 100.0 %

Operating earnings 25,921 33,972 56,116 56,002

Non-GAAP Financial Measures

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

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude 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. Each of these items are considered "non-operational" or "non-core" in nature.

Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest,Taxes, Depreciation and Amortization(Adjusted EBITDA)(A Non-GAAP Financial Measure)(Unaudited)

12 Weeks Ended 28 Weeks Ended

(In thousands) July 17, July 11, July 17, July 11, 2021 2020 2021 2020

Net earnings $ 16,814 $ 28,467 $ 36,330 $ 43,869

Income tax expense 5,850 1,918 12,206 1,949

Other expenses, net 3,257 3,587 7,580 10,184

Operating earnings 25,921 33,972 56,116 56,002

Adjustments:

LIFO expense 2,902 1,187 4,557 2,771

Depreciation and 21,406 20,097 49,497 47,753 amortization

Acquisition and 121 - 180 - integration

Restructuring andasset impairment, 3,337 3,675 3,176 13,912 net

Costs associatedwith Project One - - - 493 Team

Organizational (52 ) - 589 - realignment, net

Severanceassociated with 13 (75 ) 138 5,081 cost reductioninitiatives

Stock-based 974 1,905 5,164 4,148 compensation

Stock warrant 430 - 1,075 -

Non-cash rent (1,091 ) (1,199 ) (1,986 ) (2,793 )

Fresh Cut operating - - - 2,262 losses

(Gain) loss on (80 ) (484 ) (262 ) 3,427 disposal of assets

Other non-cash 478 99 958 99 charges

Adjusted EBITDA $ 54,359 $ 59,177 $ 119,202 $ 133,155

Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, continued (Adjusted EBITDA) (A Non-GAAP Financial Measure)(Unaudited)

12 Weeks Ended

28 Weeks Ended

(In thousands)

July 17, 2021

July 11, 2020

July 17, 2021

July 11, 2020

Food Distribution:

Operating earnings

$

16,678

$

14,409

$

37,824

$

25,799

Adjustments:

LIFO expense

1,626

595

2,420

1,389

Depreciation and amortization

7,604

6,965

17,394

17,148

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

(Gain) loss on disposal of assets

(62

)

(521

)

(99

)

1,619

Other non-cash charges

283

52

517

51

Adjusted EBITDA

$

27,897

$

25,958

$

63,566

$

66,456

Retail:

Operating earnings

$

12,711

$

24,453

$

26,903

$

37,098

Adjustments:

LIFO expense

477

258

892

601

Depreciation and amortization

10,685

10,325

24,926

24,081

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

390

642

1,870

1,392

Non-cash rent

(1,145

)

(1,150

)

(2,697

)

(2,684

)

(Gain) loss on disposal of assets

(2

)

66

(125

)

1,871

Other non-cash charges

139

34

314

34

Adjusted EBITDA

$

25,913

$

34,822

$

54,920

$

65,217

Military:

Operating loss

$

(3,468

)

$

(4,890

)

$

(8,611

)

$

(6,895

)

Adjustments:

LIFO expense

799

335

1,245

781

Depreciation and amortization

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

148

266

929

754

Non-cash rent

(89

)

(85

)

(206

)

(203

)

Gain on disposal of assets

(16

)

(29

)

(38

)

(63

)

Other non-cash charges

56

12

127

14

Adjusted EBITDA

$

549

$

(1,603

)

$

716

$

1,482

Notes: 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 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, 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.

Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest,Taxes, Depreciationand Amortization, continued(Adjusted EBITDA)(A Non-GAAP Financial Measure)(Unaudited)

12 Weeks Ended 28 Weeks Ended

(In thousands) July 17, July 11, July 17, July 11, 2021 2020 2021 2020

Food Distribution:

Operating earnings $ 16,678 $ 14,409 $ 37,824 $ 25,799

Adjustments:

LIFO expense 1,626 595 2,420 1,389

Depreciation and 7,604 6,965 17,394 17,148 amortization

Restructuring and 781 3,462 763 12,684 asset impairment, net

Costs associated with - - - 265 Project One Team

Organizational (26 ) - 287 - realignment, net

Severance associatedwith cost reduction 4 (37 ) 103 3,143 initiatives

Stock-based 436 997 2,365 2,002 compensation

Stock warrant 430 - 1,075 -

Non-cash rent 143 36 917 94

Fresh Cut operating - - - 2,262 losses

(Gain) loss on (62 ) (521 ) (99 ) 1,619 disposal of assets

Other non-cash 283 52 517 51 charges

Adjusted EBITDA $ 27,897 $ 25,958 $ 63,566 $ 66,456

Retail:

Operating earnings $ 12,711 $ 24,453 $ 26,903 $ 37,098

Adjustments:

LIFO expense 477 258 892 601

Depreciation and 10,685 10,325 24,926 24,081 amortization

Acquisition and 121 - 180 - integration

Restructuring and 2,556 213 2,413 1,228 asset impairment, net

Costs associated with - - - 164 Project One Team

Organizational (19 ) - 215 - realignment, net

Severance associatedwith cost reduction - (19 ) 29 1,432 initiatives

Stock-based 390 642 1,870 1,392 compensation

Non-cash rent (1,145 ) (1,150 ) (2,697 ) (2,684 )

(Gain) loss on (2 ) 66 (125 ) 1,871 disposal of assets

Other non-cash 139 34 314 34 charges

Adjusted EBITDA $ 25,913 $ 34,822 $ 54,920 $ 65,217

Military:

Operating loss $ (3,468 ) $ (4,890 ) $ (8,611 ) $ (6,895 )

Adjustments:

LIFO expense 799 335 1,245 781

Depreciation and 3,117 2,807 7,177 6,524 amortization

Costs associated with - - - 64 Project One Team

Organizational (7 ) - 87 - realignment, net

Severance associatedwith cost reduction 9 (19 ) 6 506 initiatives

Stock-based 148 266 929 754 compensation

Non-cash rent (89 ) (85 ) (206 ) (203 )

Gain on disposal of (16 ) (29 ) (38 ) (63 )assets

Other non-cash 56 12 127 14 charges

Adjusted EBITDA $ 549 $ (1,603 ) $ 716 $ 1,482

Notes: 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 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, 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.

Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings(A Non-GAAP Financial Measure)(Unaudited)

12 Weeks Ended 28 Weeks Ended

(In thousands) July 17, July 11, July 17, July 11, 2021 2020 2021 2020

Operating earnings $ 25,921 $ 33,972 $ 56,116 $ 56,002

Adjustments:

Acquisition and 121 - 180 - integration

Restructuring and 3,337 3,675 3,176 13,912 asset impairment, net

Costs associated with - - - 493 Project One Team

Organizational (52 ) - 589 - realignment, net

Expenses associated - 97 - 97 with tax planning

Severance associatedwith cost reduction 13 (75 ) 138 5,081 initiatives

Fresh Cut operating - - - 2,262 losses

Adjusted operating $ 29,340 $ 37,669 $ 60,199 $ 77,847 earnings

12 Weeks Ended

28 Weeks Ended

(In thousands)

July 17, 2021

July 11, 2020

July 17, 2021

July 11, 2020

Food Distribution:

Operating earnings

$

16,678

$

14,409

$

37,824

$

25,799

Adjustments:

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

Adjusted operating earnings

$

17,437

$

17,886

$

38,977

$

44,205

Retail:

Operating earnings

$

12,711

$

24,453

$

26,903

$

37,098

Adjustments:

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

-

Expenses associated with tax planning

-

32

-

32

Severance associated with cost reduction initiatives

-

(19

)

29

1,432

Adjusted operating earnings

$

15,369

$

24,679

$

29,740

$

39,954

Military:

Operating loss

$

(3,468

)

$

(4,890

)

$

(8,611

)

$

(6,895

)

Adjustments:

Costs associated with Project One Team

-

-

-

64

Organizational realignment, net

(7

)

-

87

-

Expenses associated with tax planning

-

13

-

13

Severance associated with cost reduction initiatives

9

(19

)

6

506

Adjusted operating loss

$

(3,466

)

$

(4,896

)

$

(8,518

)

$

(6,312

)

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 accounting principles generally accepted in the United States of America and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company's definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.

12 Weeks Ended 28 Weeks Ended

(In thousands) July 17, July 11, July 17, July 11, 2021 2020 2021 2020

Food Distribution:

Operating earnings $ 16,678 $ 14,409 $ 37,824 $ 25,799

Adjustments:

Restructuring and 781 3,462 763 12,684 asset impairment, net

Costs associated with - - - 265 Project One Team

Organizational (26 ) - 287 - realignment, net

Expenses associated - 52 - 52 with tax planning

Severance associatedwith cost reduction 4 (37 ) 103 3,143 initiatives

Fresh Cut operating - - - 2,262 losses

Adjusted operating $ 17,437 $ 17,886 $ 38,977 $ 44,205 earnings

Retail:

Operating earnings $ 12,711 $ 24,453 $ 26,903 $ 37,098

Adjustments:

Acquisition and 121 - 180 - integration

Restructuring and 2,556 213 2,413 1,228 asset impairment, net

Costs associated with - - - 164 Project One Team

Organizational (19 ) - 215 - realignment, net

Expenses associated - 32 - 32 with tax planning

Severance associatedwith cost reduction - (19 ) 29 1,432 initiatives

Adjusted operating $ 15,369 $ 24,679 $ 29,740 $ 39,954 earnings

Military:

Operating loss $ (3,468 ) $ (4,890 ) $ (8,611 ) $ (6,895 )

Adjustments:

Costs associated with - - - 64 Project One Team

Organizational (7 ) - 87 - realignment, net

Expenses associated - 13 - 13 with tax planning

Severance associatedwith cost reduction 9 (19 ) 6 506 initiatives

Adjusted operating $ (3,466 ) $ (4,896 ) $ (8,518 ) $ (6,312 )loss

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 accounting principles generally accepted in the United States of America and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company's definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.

Table 4: Reconciliation of Net Earnings toAdjusted Earnings from Continuing Operations(A Non-GAAP Financial Measure)(Unaudited)

12 Weeks Ended

July 17, 2021 July 11, 2020

per per diluted diluted

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

Net earnings $ 16,814 $ 0.47 $ 28,467 $ 0.80

Adjustments:

Acquisition and 121 - integration

Restructuring and 3,337 3,675 asset impairment, net

Organizational (52 ) - realignment, net

Expenses associated - 97 with tax planning

Severance associatedwith cost reduction 13 (75 ) initiatives

Total adjustments 3,419 3,697

Income tax effect on (862 ) (903 ) adjustments (a)

Impact of CARES Act - (5,165 ) (b)

Total adjustments, net 2,557 0.07 (2,371 ) (0.07 ) of taxes

Adjusted earnings from $ 19,371 $ 0.54 $ 26,096 $ 0.73 continuing operations

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

28 Weeks Ended

July 17, 2021 July 11, 2020

per per diluted diluted

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

Net earnings $ 36,330 $ 1.01 $ 43,869 $ 1.22

Adjustments:

Acquisition and 180 - integration

Restructuring and asset 3,176 13,912 impairment, net

Costs associated with - 493 Project One Team

Organizational 589 - realignment, net

Expenses associated - 97 with tax planning

Severance associatedwith cost reduction 138 5,081 initiatives

Fresh Cut operating - 2,262 losses

Pension termination - (1,004 )

Total adjustments 4,083 20,841

Income tax effect on (1,024 ) (4,997 ) adjustments (a)

Impact of CARES Act (b) - (9,510 )

Total adjustments, net 3,059 0.09 6,334 0.18 of taxes

Adjusted earnings from $ 39,389 $ 1.10 $ 50,203 $ 1.40 continuing operations

(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, 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 net 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 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.

The income tax effect on adjustments is computed by applying the(a) applicable tax rate to the adjustments.

Represents tax impacts attributable to the Coronavirus Aid, Relief and(b) Economic Security ("CARES") Act, 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 net 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 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.

Table 5: Reconciliation of Long-Term Debt and Finance Lease Obligations to NetLong-Term Debt(A Non-GAAP Financial Measure)(Unaudited)

July 17, January 2,

(In thousands) 2021 2020

Current portion of long-term debt and finance $ 5,719 $ 5,135 lease liabilities

Long-term debt and finance lease liabilities 445,574 481,309

Total debt 451,293 486,444

Cash and cash equivalents (24,136 ) (19,903 )

Net long-term debt $ 427,157 $ 466,541

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)

28 Weeks Ended

(In thousands) July 17, July 11, 2021 2020

Net cash provided by operating activities $ 73,582 $ 198,248

Less:

Purchases of property and equipment 39,838 30,609

Free cash flow $ 33,744 $ 167,639

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)

28 Weeks Ended

(In thousands) July 17, July 11, 2021 2020

Purchases of property and equipment $ 39,838 $ 30,609

Plus:

Cloud computing spend 3,971 4,970

Capital expenditures and IT capital $ 43,809 $ 35,579

Notes: Capital expenditures and IT capital is a non-GAAP financial measure calculated by adding spending related to the development of cloud computing applications spend to capital expenditures, the most directly comparable GAAP measure. Cloud computing spend only includes costs incurred during the application development phase and does not include ongoing costs of hosting or maintenance associated with these applications, which are expensed as incurred. The Company believes it is a useful indicator of the Company's investment in its facilities and systems as it transitions to more cloud-based IT systems. Capital expenditures and IT capital is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

Table 8: Reconciliation of Projected Net Earnings per Diluted Share toProjected Adjusted Earnings per Diluted Share from Continuing Operations(A Non-GAAP Financial Measure)(Unaudited)

52 Weeks Ending January 1, 2022

Low High

Net Earnings per Diluted Share $ 1.56 $ 1.69

Adjustments, net of taxes:

Acquisition and integration expenses 0.01 0.01

Restructuring and asset impairment, net 0.10 0.08

Severance associated with cost reduction initiatives 0.01 0.01

Organizational realignment, net 0.02 0.01

Projected Adjusted Earnings per Diluted Share from $ 1.70 $ 1.80 Continuing Operations

View source version on businesswire.com: https://www.businesswire.com/news/home/20210818005713/en/

CONTACT: Investor Contacts: Jason Monaco Executive Vice President and Chief Financial Officer Jason.Monaco@spartannash.com Chris Mandeville ICR SpartanNashIR@icrinc.com Anna Kate Heller ICR SpartanNashIR@icrinc.com Media Contact: Adrienne Chance Vice President Corporate Affairs and Communications Adrienne.Chance@spartannash.com