Building a Platform for Growth. December 2016

Transcription

1 Building a Platform for Growth December 2016

2 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

3 Who We Are

4 Company Highlights Ranked #351 on the Fortune 500 Leading consumer-centric distributor and food retailer TTP Pro-forma Sales (1) : Total $8.3 billion Company nearly tripled sales since FY % Military 29% 48% 25% Military Retail Food Distribution 42% Distribution $ Top Distributors (2) (sales in billions) $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 SpartanNash is the 5 th Largest Distributor and has a Platform for Continuing GROWTH! (1) TTP Pro-forma sales include Caito sales of $600MM as part of the Food Distribution segment. (2) Source: Supermarket News which excludes impact from recent or upcoming acquisitions, mergers and divestitures, including the Save-A-Lot divestiture for Supervalu and AWG s merger with Affiliated. 4

5 Investment Highlights Strong balance sheet Return of capital to shareholders through annual dividend of $.60 per common share - Yield of 1.7% (as of 11/30/16) - Represents an 11.1% increase from prior - Dividend has increased 6 years in a row Successful merger with Nash Finch Company: - Synergies exceeded $52MM - Our distribution infrastructure positions us for growth Recently announced acquisition of Caito Foods expected to close in January of 2017 Experienced Leadership Senior team averages Over 30 years in the industry Expansive Footprint Platform for growth Food Distribution covers 47 states Military Distribution offers Worldwide solution Financial Stability Net Long-term debt to Adjusted EBITDA ratio of 2.0x (1) (1) Net Long-term Debt and Adjusted EBITDA are non-gaap financial measures, please see Adjusted EBITDA Note on page 27 and Net Long-Term Debt Note on page 28, which does not include the impact of the Caito/BRT acquisition. 5

6 Strategic Initiatives

7 SpartanNash Strategic Initiatives Increasing sales and margins 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 Utilizing retail presence in key markets to complement distribution Improving operating efficiency by: Completing integration of Nash Finch operations and realization of annual synergies - Synergies exceeded $52 million target 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 7

8 Caito Foods

9 Caito Overview Recently announced acquisition of Caito Foods and BRT food distributor with focus on fresh - Annual sales in excess of $600MM - Purchase price of $217.5MM plus potential earnouts up to $12.4MM - Expected to close early January Three facilities that distribute fresh produce and floral arrangements to retail stores and food service wholesalers - Operates separate cold fresh cut processing facility providing: fresh cut fruit and vegetables, packaged salads, sandwiches and party trays - Newly constructed USDA certified kitchen facility, providing fresh/healthy ready to eat product expected to produce product and generate revenue in Q1 2017: Example Products: Quiche, grilled chicken, meatloaf, pastas, pot pies, etc. 9

10 Strategic Rationale Increases scale and reach with our combined distribution network - Compliments our geographic footprint Improves our capabilities and volume in: - Fresh produce - Value added produce - Cooked ready-to-eat foods Diversifies and increases the size of our customer base 6-7% Deepens relationships with existing customers - Ability to deliver a broader assortment of products to customers 5-6% 3-4% 2-3% Caito s management team adds to our expertise and experience in Fresh 10

11 Food Distribution

12 Food Distribution - Competitive Landscape 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 12

13 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 13

14 Military Distribution

15 Military Food Distribution Dedicated distributor for the Military Resale System offering worldwide solution with global partner Asia Europe 15

16 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 16

17 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 17

18 Retail

19 Retail 158 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 19

20 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 20

21 Financial Highlights

22 Sales In Millions $8,000 $7,500 $7,757 $7,781 $7,652 $7,000 $6,500 $6,000 $5,500 $5,884 $5,906 $5,000 Combined TTP Dec (1) (2) FY 2014 FY 2015 Q3YTD FY 2015 Q3YTD FY 2016 (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 53 rd week. 22

23 Operating Earnings/Adjusted Operating Earnings (4) In Millions $150 $140 $130 $120 $110 $124 $49 $132 $21 $141 $18 $106 Adjusted Operating Earnings (4) Adjustments to Operating Earnings (4) Operating Earnings $113 $100 $90 $16 $29 $80 $70 $60 $50 $75 $111 $123 $90 $84 (1,2) TTP Dec FY 2014 (3) FY 2015 Q3YTD FY 2015 Q3YTD FY 2016 (1) 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) TTP Operating earnings were negatively impacted by $49 during the period, predominantly as a result of merger related expenses and asset impairment/restructuring charges. (3) FY 2014 excludes the benefit of the 53 rd week, which was $3.7 million. (4) Adjusted Operating Earnings is a non-gaap financial measure, please see Adjusted Operating Earnings Note on Slide

24 Adjusted EBITDA (3) In Millions $240 $220 $231 $230 $200 $207 $180 $160 $180 $180 $140 $120 $100 TTP Dec (1) (2) FY 2014 FY 2015 Q3 YTD FY 2015 Q3 YTD FY 2016 (1) 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 the 53 rd week, which was $3.7 million. (3) Adjusted EBITDA is a non-gaap financial measure, please see Adjusted EBITDA Note on page

25 Balance Sheet & Operating Metrics As of October 8, 2016: TTP Sales of $7.6 billion and TTP Adjusted EBITDA (1) of $230 million $200 million of Strategic Availability under revolving credit facility Net long-term debt to Adjusted EBITDA of 2.0-to-1.0 Return of capital to shareholders through annual dividend of $0.60 per common share with a yield of 1.7%, 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 27 and Net Long-Term Debt Note on page

26 Adjusted Operating Earnings Note (000 s) FY 2014 FY 2015 Q3YTD FY 2015 Q3YTD FY 2016 Combined TTP (1) 53 Weeks Ending (2) 52 Weeks Ending 40 Weeks Ending 40 Weeks Ending 12/28/2013 1/3/2015 1/2/ /10/ /8/2016 Unaudited Unaudited Unaudited Operating Earnings $74,886 $114,846 $122,875 $89,871 $84,147 Add (Subtract): Restructuring charges (gains) and asset impairment 19,622 6,166 8,802 7,762 23,714 Merger integration and acquisition 27,310 12,675 8,433 7,252 4,237 Stock compensation modifications 4, Pension settlement accounting 621 1, Incremental incentive compensation on tax planning benefit Gain on termination of supply agreement (2,667) Fees and expenses related to tax planning strategies Other unusual items Adjusted operating earnings, including 53 rd week $123,956 $136,165 $141,228 $105,825 $112, rd week - (3,673) Adjusted operating earnings, excluding 53 rd week $123,956 $132,492 $141,228 $105,825 $112,937 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 53 rd week. 26

27 Adjusted EBITDA Note (000 s) Combined TTP (1) FY Weeks Ending (2) FY Weeks Ending Q3YTD FY Weeks Ending Q3YTD FY Weeks Ending 12/28/2013 1/3/2015 1/2/ /10/ /8/2016 Consolidated Net earnings $23,221 $58,596 $62,710 $45,981 $43,982 Plus: Discontinued operations Income taxes 17,450 31,329 37,093 27,444 25,635 Debt Extinguishment 8, , Non-operating expense 25,199 24,397 21,445 16,425 14,262 Operating earnings $74,886 $114,846 $122,875 $89,871 $84,147 Plus: Depreciation and amortization 80,120 86,994 83,334 64,960 58,931 LIFO expense (income) (2,347) 5,604 (1,201) 3,195 2,130 Provision for asset impairments and exit costs 20,660 6,166 8,802 7,762 23,714 Other unusual items (2,823) 2,478 (530) (409) 3 Merger fees 27,310 12,675 8,433 7,252 4,237 Fees and expenses related to tax strategies Non-cash stock compensation & other charges 9,212 5,679 7,240 6,470 7,010 Adjusted EBITDA $207,018 $234,442 $229,522 $179,670 $180, rd week 0 (3,673) Adjusted EBITDA, excluding 53rd week $207,018 $230,769 $229,522 $179,670 $180,172 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 53 rd week. 27

28 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) 10/10/2015 1/2/ /8/2016 Current maturities of long-term debt and capital lease obligations 21,993 19,003 18,998 Long-term debt and capital lease obligations 516, , ,365 Total debt 538, , ,363 Cash and cash equivalents (8,510) (22,719) (26,398) Total net long-term debt 530, , ,965 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. 28