Building a Platform for Growth
July 2016
Forward Looking Statements
This presentation includes “forward-looking statements” about the
plans, strategies, objectives, goals or expectations of SpartanNash
Company. These forward-looking statements are identifiable by words
or phrases indicating that the Company is “positioned” or “poised” for or
“expects” a particular result; that a particular occurrence or event has
“potential” or “will” occur or be pursued or “continue” in the future; or
that a development is an “opportunity,” “priority,” “strategy,” or “focus.”
projections of revenue and other results and statements regarding the
Company’s capital plan, strategies, expected synergies, and responses
to trends are inherently forward-looking. Actual results may differ
materially from stated expectations, and you should not place undue
reliance on forward-looking statements. Although we expect to continue
to pay a quarterly cash dividend, adoption of a dividend policy does not
commit the board of directors to declare future dividends. Each future
dividend will be considered and declared by the Board of Directors at
its discretion.
2
Who We Are
Company Highlights
•
Ranked #351 on the Fortune 500
•
Leading consumer-centric distributor and food retailer
•
Company nearly tripled sales since FY 2013
TTP Sales:
Total $7.6 billion
Military
43%
29%
$35.0
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
28%
Military
Retail
29%
Food
Distribution
Distribution
42%
2015 Top Distributors
(sales in billions)
SpartanNash is the 5th
Largest Distributor and
has a Platform for
Continuing GROWTH!
4
Investment Highlights
•
•
•
Strong balance sheet
Return of capital to shareholders
through annual dividend of $.60
per common share
-
Yield of 1.9% (as of 7/12/16)
-
Represents an 11.1% increase from prior
-
Dividend has increased 6 years in a row
Financial
Stability
Experienced
Leadership
Net Long-term debt to
Adjusted EBITDA
ratio of 2.1x(1)
Senior team averages
Over 30 years in
the industry
Successful merger with Nash
Finch Company:
-
Expect to exceed $52 million in annual
cost synergies by the end of this year
Expansive
Footprint
-
Our distribution infrastructure positions
us for growth
Platform for growth
Food Distribution covers 47 states
Military Distribution offers
Worldwide solution
(1) Net Long-term Debt and Adjusted EBITDA are non-GAAP financial measures, please see Adjusted EBITDA Note on page 23 and Net Long-Term
Debt Note on page 25.
5
Strategic Initiatives
SpartanNash Strategic Initiatives
Increasing sales and margins by:
Improving operating efficiency by:
•
Participating in the consolidation of the food
industry
•
•
Continuing expansion into adjacent channels
of distribution in Food and Military Distribution
•
Leveraging our distribution network to
increase penetration in our traditional and nontraditional account base
•
•
Investing in the business with an emphasis
on West retail region – including a substantial
rebranding of the Omaha market and
introduction of loyalty and merchandising
programs
Completing integration of Nash Finch
operations and realization of annual synergies
-
•
Expect to exceed $52 million synergy
target by the end of FY16
Rationalizing warehouse infrastructure
-
Westville, IN
-
Statesboro, GA
•
Continuing to improve operational efficiencies
in both distribution networks and retail operations
•
Utilizing capital and technology to improve our
distribution network and infrastructure
Utilizing retail presence in key markets to
complement distribution
7
Food Distribution
Food Distribution
•
•
Full service value-added distributor of choice to 2,100 independent grocery stores
Offering comprehensive private brand program with 7,100 products
Providing market-leading products and best-in-class services
Covering 47 states
9
Food Distribution
Key Food Distribution Initiatives:
•
Leveraging our network to allow us to gain new customers
•
Expanding product offering and relationships with existing accounts
•
Increasing private brand penetration
•
Enhancing customer service
•
Implementing productivity and efficiency initiatives
•
Pursuing strategic acquisitions and tuck in opportunities
10
Military Distribution
Military Food Distribution
• Dedicated distributor for the Military Resale System offering
worldwide solution with global partner
Asia
Europe
12
Military Food Distribution
•
Premier full line, food and related product supplier for military
commissaries (supermarkets) and exchanges for the U.S. government
•
Approximately 600 distribution contracts with packaged goods companies
-
Distribute products to 169 commissaries located within the Continental US and in Europe
-
Serve over 440 Exchange locations worldwide
Sales to Commissaries
All Other
$2.2 B
SpartanNash
$2.2 B
Source: DeCA reported sales by Commissary and Company Data
13
Military Food Distribution
Key Military Initiatives:
•
Partnering with DeCA to recommend solutions and efficiency initiatives
•
Targeting additional lines of supply with military and other government agencies
•
Leveraging worldwide network and export capabilities for non-military applications
•
Implementing supply chain optimization
14
Retail
Retail
•
160 supermarkets offering value and a quality shopping experience
- Average size of 42,000 sq ft and sales of $13 million per year
-
29 fuel centers and 91 locations with pharmacies
16
Retail
Key Retail Initiatives:
•
•
Deploying capital, merchandising, and marketing efforts
- Store remodels and rebranding Omaha stores
- Loyalty and merchandising programs
- Pharmacy program
- Fuel Rewards
Leveraging Yes Rewards loyalty data with strategic partners
- Improve targeting
- Customer segmentation
•
Enhancing produce offering
•
Focusing on key specialty categories
•
-
Pet
-
Craft beer
-
Natural and organic
-
Wellness
-
Food service
Undertake opportunistic roll-ups
17
Financial Highlights
Sales
In Millions
$10,000
$9,000
$8,000
$7,000
$7,757
$7,781
$7,652
$6,000
$5,000
$4,000
$3,000
$2,000
$2,313
$2,279
Q1 FY 2015
Q1 FY 2016
$1,000
$0
Combined TTP (1)
Dec. 2013
FY 2014
(2)
FY 2015
(1) Combined TTP includes results of the 52 weeks ended December 28, 2013 of the combined operations of Spartan Stores and Nash Finch
based on each company’s historical results.
(2) FY 2014 excludes the benefit of $135.2 million of sales attributable to the 53rd week.
19
Operating(4)Earnings/Adjusted Operating
Earnings
Adjusted
Operating Earnings (4)
Adjustments to
Operating Earnings (4)
In Millions
$140
$120
$141
$132
$124
$18
$21
$49
Operating Earnings
$100
$80
$60
$34
$10
$40
$20
$0
$75
TTP Dec. 2013
(1)
(2)
(3)
(4)
$111
(1,2)
FY 2014
(3)
$39
$17
$123
$24
$22
FY 2015
Q1 FY 2015
Q1 FY 2016
TTP includes results of the 52 weeks ended December 28, 2013 of the combined operations of Spartan Stores and Nash Finch based on each company’s historical results.
TTP Operating earnings were negatively impacted by $49 during the period, predominantly as a result of merger related expenses and asset impairment/restructuring charges.
FY 2014 excludes the benefit of the 53rd week, which was $3.7 million.
Adjusted Operating Earnings is a non-GAAP financial measure, please see Adjusted Operating Earnings Note on Slide 23.
20
Adjusted EBITDA
(3)
In Millions
$300
$250
$231
$200
$230
$207
$150
$100
$50
$0
(1)
(2)
(3)
TTP
Dec. 2013 (1)
FY 2014
(2)
FY 2015
$66
$68
Q1 FY 2015
Q1 FY 2016
TTP includes results of the 52 weeks ended December 28, 2013 of the combined operations of Spartan Stores and Nash Finch based on each company’s historical
results.
FY 2014 excludes the benefit of the 53rd week, which was $3.7 million.
Adjusted EBITDA is a non-GAAP financial measure, please see Adjusted EBITDA Note on page 24.
21
Balance Sheet & Operating Metrics
As of April 23, 2016:
• TTP Sales of $7.6 billion and TTP Adjusted EBITDA(1) of
$232 million
• $200 million of strategic availability under revolving credit
facility
• Net long-term debt-to-capital ratio: 0.38-to-1.0 and net longterm debt to Adjusted EBITDA of 2.10-to-1.0
• Return of capital to shareholders through annual dividend of
$0.60 per common share with a yield of 1.9%, dividend rate
has increased by 131% over the past 5 years
Strong cash flow and access to capital will support operational
and strategic initiatives
(1) Please see Adjusted EBITDA Note on page 23 and Net Long-Term Debt Note on page 25.
22
Adjusted Operating Earnings Note (000’s)
Operating Earnings
Add (Subtract):
Restructuring charges (gains) and asset impairment
Merger integration and acquisition
Stock compensation modifications
Pension settlement accounting
Incremental incentive compensation on tax planning benefit
Gain on termination of supply agreement
Fees and expenses related to tax planning strategies
Other unusual items
Adjusted operating earnings, including 53rd week
53rd week
Adjusted operating earnings, excluding 53rd week
Combined
TTP (1)
12/28/2013
Unaudited
$74,886
19,622
27,310
4,174
621
(2,667)
10
$123,956
$123,956
FY 2014
53 Weeks
Ending(2)
1/3/2015
FY 2015
52 Weeks
Ending
1/2/2016
Q1 FY 2015
$114,846
$122,875
16 Weeks
Ending
4/25/2015
Unaudited
$23,853
6,166
12,675
1,578
900
$136,165
(3,673)
$132,492
8,802
8,433
549
569
$141,228
$141,228
7,338
2,684
$33,875
$33,875
Q1 FY 2016
16 Weeks
Ending
4/23/2016
Unaudited
$21,660
15,304
897
679
$38,540
$38,540
Note: Adjusted operating earnings is a non-GAAP operating financial measure that the Company defines as operating earnings (loss) plus or minus adjustments for items that do
not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted operating earnings provide a meaningful representation of its operating performance for the Company. The Company considers adjusted
operating earnings as an additional way to measure operating performance on an ongoing basis. Adjusted operating earnings is meant to reflect the ongoing operating
performance of its military, food distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and
also excludes the contributions of activities classified as discontinued operations. Because adjusted operating earnings is a performance measure that management uses to
allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for investors. In addition, securities
analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted operating earnings format.
Adjusted operating earnings is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a
substitute for operating earnings (loss), 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.
(1) Combined TTP includes results of the 52 weeks ended December 28, 2013 of the combined operations of Spartan Stores and Nash Finch based on
each company’s historical results.
(2) 53 weeks ended January 3, 2015 excludes operating earnings benefit of $3,673 attributable to the 53rd week .
23
Adjusted EBITDA Note
Combined
FY 2014
53 Weeks
TTP (1)
12/28/2013
$23,221
(000’s)
Ending (2)
1/3/2015
$58,596
FY 2015
52 Weeks
Ending
1/2/2016
$62,710
FY 2015
16 Weeks
Ending
4/25/2015
$10,327
FY 2016
16 Weeks
Ending
4/23/2016
$9,851
727
17,450
8,289
25,199
$74,886
524
31,329
0
24,397
$114,846
456
37,093
1,171
21,445
$122,875
120
6,684
0
6,722
$23,853
109
6,027
0
5,673
$21,660
Plus:
Depreciation and amortization
LIFO expense (income)
Provision for asset impairments and exit costs
Other unusual items
Merger fees
Non-cash stock compensation & other charges
Adjusted EBITDA
80,120
(2,347)
20,660
(2,823)
27,310
9,212
$207,018
86,994
5,604
6,166
2,478
12,675
5,679
$234,442
83,334
(1,201)
8,802
39
8,433
7,240
$229,522
25,785
1,723
7,338
(247)
2,684
4,753
$65,889
23,369
1,412
15,304
371
897
5,024
$68,037
53rd week
Adjusted EBITDA, excluding 53rd week
0
$207,018
(3,673)
$230,769
0
$229,522
0
$65,889
0
$68,037
Consolidated Net earnings
Plus:
Discontinued operations
Income taxes
Debt Extinguishment
Non-operating expense
Operating earnings
Notes: Consolidated Adjusted EBITDA is a non-GAAP operating financial measure that we define as operating earnings plus depreciation and amortization, and other non-cash items
including deferred (stock) compensation, the LIFO provision, as well as adjustments for unusual items that do not reflect the ongoing operating activities of SpartanNash and costs
associated with the closing of operational locations.
We believe that Adjusted EBITDA provides a meaningful representation of our operating performance for SpartanNash as a whole and for our operating segments. We consider Adjusted
EBITDA as an additional way to measure operating performance on an ongoing basis. Adjusted EBITDA is meant to reflect the ongoing operating performance of our military, food
distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of
activities classified as discontinued operations. Because Adjusted EBITDA is a performance measure that management uses to allocate resources, assess performance against its peers,
and evaluate overall performance, we believe it provides useful information for our investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that
communicate with us request our operating financial results in Adjusted EBITDA format.
Adjusted EBITDA 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. Our definition of Adjusted EBITDA may not be identical to similarly titled measures reported by
other companies.
(1) Combined TTP includes results of the 52 weeks ended December 28, 2013 of the combined operations of Spartan
Stores and Nash Finch based on each company’s historical results.
(2) 53 weeks ended January 3, 2015 excludes EBITDA benefit of $3,673 attributable to the 53rd week .
24
Net Long-Term Debt Note
(000’s)
Reconciliation of Long-Term Debt and Capital Lease Obligations to Total Net Long-Term Debt and Capital Lease Obligations
(A Non-GAAP Financial Measure)
(In thousands)
(Unaudited)
Current maturities of long-term debt and capital lease obligations
Long-term debt and capital lease obligations
Total debt
Cash and cash equivalents
Total net long-term debt
4/25/2015
19,019
516,237
535,256
(8,475)
526,781
1/2/2016
19,003
467,793
486,796
(22,719)
464,077
4/23/2016
19,083
496,114
515,197
(28,687)
486,510
Notes: Total net long-term debt is a non-GAAP financial measure that is defined as long term debt and capital lease obligations plus current maturities of long-term debt and capital lease
obligations less cash and cash equivalents. The Company believes 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.
25