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Spartan Stores Announces Second Quarter Fiscal 2013 Financial Results

Stocks in this article: SPTN

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are identifiable by words or phrases such as “initiatives”, “guidance”, “priority”, “trend”, “outlook”, “position”, “momentum”, or “strategy”; that an event or trend “could”, “will” or “should” occur “begin” “remain” or “continue” or is “likely” or that Spartan Stores or its management “anticipates”, “believes”, “expects” or “plans” a particular result. Accounting estimates are inherently forward-looking. Our restructuring cost provisions are estimates and actual costs may be more or less than these estimates and differences may be material. These forward-looking statements are subject to a number of factors that could cause actual results to differ materially. Our ability to achieve the results stated in our “Outlook” discussion; successfully realize growth opportunities; expand our customer base; effectively implement and achieve the expected benefits of capital investments, our new retail banner, our loyalty program, warehouse consolidation and store openings; successfully respond to the weak economic environment and changing consumer behavior; anticipate and successfully respond to openings of competitors’ stores; achieve expected sales, cash flows, operating efficiencies and earnings; implement plans, programs and strategies; reduce debt; and, continue to pay dividends and repurchase shares is not certain and depends on many factors, not all of which are in our control. Additional information about the risk factors to which Spartan Stores is exposed and other factors that may adversely affect these forward-looking statements is contained in Spartan Stores’ reports and filings with the Securities and Exchange Commission. Other risk factors exist and new risk factors may emerge at any time. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictions of future results. Spartan Stores undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date of this press release.

 
SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 
  12 Weeks Ended   24 Weeks Ended
September 15,   September 10, September 15,   September 10,
  2012     2011     2012     2011  
 
Net sales $ 621,559 $ 619,647 $ 1,225,471 $ 1,222,211
Cost of sales   491,333     486,910     973,525     964,137  
Gross margin 130,226 132,737 251,946 258,074
 
Operating expenses
Selling, general and administrative 102,117 104,483 203,454 207,457
Depreciation and amortization 8,805 8,408 17,475 16,775
Restructuring, asset impairment and other   356     (135 )   356     (135 )
Total operating expenses 111,278 112,756 221,285 224,097
 
Operating earnings 18,948 19,981 30,661 33,977
 
Non-operating expense (income)
Interest expense 2,150 2,530 4,387 4,876
Non-cash convertible debt interest 904 835 1,794 1,658
Other, net   (664 )   5     (674 )   8  
Total non-operating expense, net   2,390     3,370     5,498     6,542  
 
Earnings before income taxes and discontinued operations 16,558 16,611 25,163 27,435
Income taxes   6,203     6,341     8,732     11,030  
Earnings from continuing operations 10,355 10,270 16,431 16,405
 
Loss from discontinued operations, net of taxes   (50 )   (18 )   (123 )   (124 )
Net earnings $ 10,305   $ 10,252   $ 16,308   $ 16,281  
 
Basic earnings per share:
Earnings from continuing operations $ 0.48 $ 0.45 $ 0.75 $ 0.72
Loss from discontinued operations  

(0.01

)*

  -    

-

*

  (0.01 )
Net earnings $ 0.47   $ 0.45   $ 0.75   $ 0.71  
 
Diluted earnings per share:
Earnings from continuing operations $ 0.47 $ 0.45 $ 0.75 $ 0.72
Loss from discontinued operations   -     -    

-

*

  (0.01 )
Net earnings $ 0.47   $ 0.45   $ 0.75   $ 0.71  
 
Weighted average shares outstanding:
Basic 21,747 22,862 21,800 22,777
Diluted 21,824 22,962 21,880 22,872
 

*Includes Rounding

 
SPARTAN STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 
  September 15,   September 10,

Assets

2012 2011
 
Current assets
Cash and cash equivalents $ 7,491 $ 62,080
Accounts receivable, net 59,719 60,026
Inventories, net 136,032 121,287
Prepaid expenses 10,606 8,466
Other current assets 10,896 1,537
Property held for sale   710     1,708  
Total current assets 225,454 255,104
 
Goodwill 239,834 240,704
 
Property and equipment, net 261,552 243,545
 
Other, net   57,173     56,773  
 
Total assets $ 784,013   $ 796,126  
 

Liabilities and Shareholders’ Equity

 
Current liabilities
Accounts payable $ 128,803 $ 129,185
Accrued payroll and benefits 30,089 32,384
Other accrued expenses 17,611 14,580
Current portion of restructuring costs 3,271 4,101
Current maturities of long-term debt and capital lease obligations   4,185     4,249  
Total current liabilities 183,959 184,499
 
Long-term liabilities
Deferred taxes on income 87,805 76,585
Postretirement benefits 13,521 14,321
Other long-term liabilities 14,975 17,118
Restructuring costs 6,313 8,908
Long-term debt and capital lease obligations   150,789     173,282  
Total long-term liabilities 273,403 290,214
 
Commitments and contingencies
 
Shareholders’ equity

Common stock, voting, no par value; 50,000 shares authorized; 21,754 and 22,215 shares outstanding

145,289

164,648

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

-

-
Accumulated other comprehensive loss (13,793 ) (12,981 )
Retained earnings   195,155     169,746  
Total shareholders’ equity   326,651     321,413  
 
Total liabilities and shareholders’ equity $ 784,013   $ 796,126  
 
SPARTAN STORES, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 
 

12 Weeks Ended

September 15,   September 10,
  2012     2011  
Cash flows from operating activities

Net cash provided by operating activities

$ 20,083 $ 35,741
Net cash (used in) investing activities (11,758 ) (11,055 )
Net cash (used in) financing activities (7,026 ) (211 )
Net cash provided by (used in) discontinued operations   99     (108 )
Net increase in cash and cash equivalents 1,398 24,367
Cash and cash equivalents at beginning of period   6,093     37,713  
Cash and cash equivalents at end of period $ 7,491   $ 62,080  
 
SPARTAN STORES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

 
  12 Weeks Ended   24 Weeks Ended
September 15,   September 10, September 15,   September 10,
2012 2011 2012 2011
 

Retail Segment:

Net sales $ 362,317 $ 363,421 $ 707,881 $ 708,856
Operating Earnings $ 8,099 $ 11,217 $ 11,990 $ 17,811
 

Distribution Segment:

Net sales $ 259,242 $ 256,226 $ 517,590 $ 513,355
Operating Earnings $ 10,849 $ 8,764 $ 18,671 $ 16,166
 
SPARTAN STORES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION AND AMORTIZATION (Adjusted EBITDA)

(Unaudited)

(In thousands)

 
  Second Quarter     Year-to-Date
Sept. 15,   Sept. 10, Sept. 15,   Sept. 10,
  2012     2011     2012     2011  
Net earnings $ 10,305 $ 10,252 $ 16,308 $ 16,281
Add:
Discontinued operations 50 18 123 124
Income taxes 6,203 6,341 8,732 11,030
Interest expense, net 3,071 3,412 6,227 6,654
Non-operating expense   (681 )   (42 )   (729 )   (112 )
Operating earnings 18,948 19,981 30,661 33,977
Add:
Depreciation and amortization 8,805 8,408 17,475 16,775
LIFO expense 590 869 1,380 1,527
Restructuring and asset impairment costs 356 (135 ) 356 (135 )
Other unusual items - 1,194 - 1,194
Non-cash stock compensation and other charges   292     810     1,761     2,360  
Adjusted EBITDA $ 28,991   $ 31,127   $ 51,633   $ 55,698  
 
Reconciliation of operating earnings to adjusted EBITDA by segment:
 
Retail:
Operating earnings $ 8,099 $ 11,217 $ 11,990 $ 17,811
Add:
Depreciation and amortization 6,833 6,432 13,544 12,886
LIFO expense 424 526 848 964
Restructuring and asset impairment costs 356 (98 ) 356 (98 )
Non-cash stock compensation and other charges   687     365     1,457     1,137  
Adjusted EBITDA $ 16,399   $ 18,442   $ 28,195   $ 32,700  
 
Distribution:
Operating earnings $ 10,849 $ 8,764 $ 18,671 $ 16,166
Add:
Depreciation and amortization 1,972 1,976 3,931 3,889
LIFO expense 166 343 532 563
Restructuring and asset impairment costs - (37 ) - (37 )
Other unusual items - 1,194 - 1,194
Non-cash stock compensation and other charges   (395 )   445     304     1,223  
Adjusted EBITDA $ 12,592   $ 12,685   $ 23,438   $ 22,998  

Notes: Consolidated Adjusted EBITDA is a non-GAAP operating financial measure that we define as net earnings from continuing operations plus depreciation and amortization, and other non-cash items including imputed interest, deferred (stock) compensation, the LIFO provision, as well as adjustments for unusual items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations, interest expense and the provision for income taxes to the extent deducted in the computation of Net Earnings.

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