GRAND RAPIDS, Mich. - SpartanNash Company (the "Company") (Nasdaq: SPTN) today reported financial results for its 12-week third quarter ended Oct. 9, 2021.

Third Quarter Fiscal 2021 Highlights

• Net sales of $2.07 billion increased 0.6% from prior year quarter net sales of $2.06 billion, due to positive sales contributions associated with growth from Food Distribution and Retail.
• Retail comparable store sales increased 3.1% for the quarter. Comparable store sales increased by 13.5% on a two-year basis, representing sequential improvement on a quarterly basis.
• EPS was $0.42 per share, and adjusted EPS was $0.43 per share.
• Adjusted EBITDA was $51.5 million, compared to $57.0 million in the prior year quarter.
• Cash generated from operating activities was $70.4 million during the third quarter, leading to a $47.1 million net paydown of long-term debt and an improvement in the Company's net long-term debt-to-adjusted-EBITDA ratio to 1.7x at quarter end.
• The Company increased the low end of the fiscal 2021 profitability outlook range. Adjusted EBITDA is now expected to range from $205 to $210 million. In addition, the Company increased and narrowed the range of retail comparable sales expectations from a decline of 5% to 3% to a decline of 2% to 1%.

"We are proud of these solid third-quarter results, and we are appreciative of our frontline associates who continue to execute on a daily basis through industry-wide labor, inflation and supply chain challenges," said SpartanNash President and CEO Tony Sarsam. "Across our organization, we have shown great resolve and discipline, helping to deliver strong performance and allowing for us to once again raise our full-year earnings outlook."

Sarsam continued, "To position ourselves for continued success, we are doubling down on our People First culture and remaining keenly focused on operational excellence. With the upfront investments we are making with our supply chain transformation initiative, we will become better positioned for sustainable and profitable growth over the long term."

Consolidated Financial Results

Consolidated net sales for the third quarter increased $12.4 million, or 0.6%, to $2.07 billion from $2.06 billion in the prior year quarter. The increase was due to continued growth with certain existing Food Distribution customers and an increase in comparable store sales within the Retail segment, partially offset by lower sales within the Military segment.

Gross profit for the third quarter was $329.5 million, or 15.9% of net sales, compared to $324.8 million, or 15.8% of net sales, in the prior year quarter. Gross profit rate growth was driven by inflation within the Food Distribution and Military segments, partially offset by LIFO expense, as well as an increase in the proportion of margin accretive Retail and Food Distribution segment sales.

Reported operating expenses for the third quarter were $306.8 million, or 14.8% of net sales, compared to $295.8 million, or 14.4% 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 primarily to higher labor and transportation costs across the supply chain network, related to the ongoing tight labor conditions, and higher corporate administrative costs. These increases in expense rates were partially offset by lower restructuring and asset impairment charges compared to the prior year quarter.

The Company reported operating earnings of $22.7 million, compared to $29.0 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 $22.9 million compared to $35.8 million in the prior year quarter, and were adjusted for the items detailed in Table 3.

Interest expense decreased $0.5 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 $15.2 million, or $0.42 per diluted share, compared to $20.0 million, or $0.56 per diluted share in the prior year quarter. The decline reflects the operating earnings and non-operating expense changes noted above. Adjusted earnings from continuing operations⁽²⁾ for the third quarter were $15.3 million, or $0.43 per diluted share, compared to $25.1 million, or $0.70 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 $5.5 million to $51.5 million, compared to $57.0 million in the prior year quarter, due to the changes in adjusted operating earnings mentioned above. In addition, the increase in LIFO expense impacted the relationship between adjusted operating earnings and adjusted EBITDA⁽³⁾ 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 increased $19.1 million, or 1.9%, to $1.03 billion from $1.01 billion in the prior year quarter. The increase in net sales was due to continued growth with certain existing Food Distribution customers and the favorable impact of inflation. Net sales increased $92.3 million, or 9.8%, over the third quarter of 2019.

Reported operating earnings for Food Distribution were $10.0 million, compared to $9.2 million in the prior year quarter. During the prior year quarter, the Company made the decision to abandon a tradename within this segment, resulting in an impairment of the associated indefinite-lived tradename asset. The increase in reported operating earnings for Food Distribution compared to the prior year was due to cycling this asset impairment charge, as well as increased earnings due to the growth in net sales and gross profit rate, mostly offset by increases in supply chain expenses. The growth in the gross profit rate was driven primarily by an increase in average sales price due to inflation, partially offset by an increase in LIFO expense. Adjusted operating earnings⁽¹⁾ were $10.1 million, compared to $15.7 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 increased $12.1 million, or 2.0%, to $608.7 million from $596.6 million in the prior year quarter, primarily due to increases in comparable store sales and fuel sales in the current year, partially offset by store closures. Retail comparable store sales grew by 3.1% for the quarter and grew by 13.5% on a two-year comparable basis.

Reported operating earnings for Retail were $16.8 million, compared to $22.3 million in the prior year quarter. The decrease in reported operating earnings was due to lower gross margin rates driven by lower fuel margins, cycling favorable prior year inventory shrink, and reduced vendor promotional activity in the current year. These unfavorable variances were partially offset by the increase in net sales. Adjusted operating earnings⁽¹⁾ were $17.1 million, compared to $22.6 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges and acquisition and integration charges in both the current and prior year quarters.

Military

Net sales for Military decreased $18.8 million, or 4.1%, to $433.2 million from $452.0 million in the prior year quarter. The decrease was primarily related to a reduction in export sales as a result of cycling the prior year quarter's increased consumer demand, coupled with supply chain challenges at international shipping ports in the current year quarter, in addition to the continuation of lower volumes at domestic commissaries. Net sales decreased $66.0 million, or 13.2% from the third quarter of 2019.

The reported operating loss for Military was $4.0 million, compared to $2.5 million in the prior year quarter. The increase in the reported operating loss was due to the decrease in net sales and higher rate of supply chain expense, partially offset by improvements in gross margin rates. Gross margin rates increased due to inflation and were partially offset by higher LIFO expense. The adjusted operating loss⁽¹⁾ in the Military segment was $4.4 million compared to a $2.5 million loss in the prior year. Adjusted operating earnings exclude asset impairment and restructuring gains in the current year quarter.

Balance Sheet and Cash Flow

Cash flows provided by operating activities for the year-to-date period were $144.0 million compared to $223.8 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 operating cash flows. The Company reduced net long-term debt⁽⁵⁾ by $87.0 million for the year-to-date period, which resulted in an improvement in the Company's net long-term debt to adjusted EBITDA ratio over this period from 2.0x to 1.7x.

Capital expenditures and IT capital⁽⁶⁾ totaled $61.9 million in the year-to-date period compared to $53.5 million in the prior year.

Through the third quarter, the Company declared $21.6 million in cash dividends, equal to $0.20 per common share.

Outlook

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, and last updated on Aug. 18, 2021:

Conference Call

A telephone conference call to discuss the Company's third quarter financial results is scheduled for Thursday, Nov. 11, 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 food solutions company that delivers the ingredients for a better life through customer-focused innovation. Its 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 and the Our Family® private label brand. SpartanNash serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar and Djibouti. The company owns 146 supermarkets-primarily under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery and Dan's Supermarket-and shares its operational insights to drive solutions for SpartanNash food retail customers. Committed to fostering a People First culture, the SpartanNash family of Associates is 19,000 strong and growing. For more information, visit spartannash.com.

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.

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, 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.

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 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, 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.

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, 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.

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.