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SpartanNash Company

08/18/2022 | Press release | Distributed by Public on 08/18/2022 14:12

Quarterly Report for Quarter Ending July 16, 2022 (Form 10-Q)

10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 16, 2022.


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 000-31127

SPARTANNASH COMPANY

(Exact Name of Registrant as Specified in Its Charter)


Michigan		38-0593940
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

850 76thStreet, S.W. P.O. Box 8700 Grand Rapids, Michigan		49518
(Address of Principal Executive Offices)		(Zip Code)

(616) 878-2000

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

SPTN

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒

As of August 16, 2022, the registrant had 35,747,221outstanding shares of common stock, no par value.

FORWARD-LOOKING STATEMENTS

The matters discussed in this Quarterly Report on Form 10-Q, in the Company's press releases, in the Company's website-accessible conference calls with analysts, and investor presentations include "forward-looking statements" about the plans, strategies, objectives, goals or expectations of SpartanNash Company and subsidiaries ("SpartanNash" or "the Company"). These forward-looking statements are identifiable by words or phrases indicating that the Company or management "expects," "anticipates," "plans," "believes," or "estimates," or that a particular occurrence or event "may," "could," "should," "will" or "will likely" result, occur or be pursued or "continue" in the future, that the "outlook", "trend", "guidance" or "target" is toward a particular result or occurrence, that a development is an "opportunity," "priority," "strategy," "focus," that the Company is "positioned" for a particular result, or similarly stated expectations.

Undue reliance should not be placed on these forward-looking statements contained in this Quarterly Report on Form 10-Q, SpartanNash's Annual Report on Form 10-K for the fiscal year ended January 1, 2022 and other periodic reports filed with the Securities and Exchange Commission ("SEC"), which speak only as of the date made. There are many important factors that could cause actual results to differ materially. These risks and uncertainties include the Company's ability to compete in the highly competitive grocery distribution, retail grocery and military distribution industries; changes in economic or geopolitical conditions, including inflationary pressures and the Russia-Ukraine conflict; interest rate fluctuations; labor relations issues and rising labor costs; the ability of customers to fulfill their obligations to the Company; the Company's dependence on certain major customers, suppliers and vendors; disruptions to the Company's information security network; disruptions associated with the COVID-19 pandemic; the Company's ability to implement its growth strategy and transformation initiatives; instances of security threats, severe weather conditions and natural disasters; impairment charges for goodwill and other long-lived assets; the Company's ability to successfully manage leadership transitions; the Company's ability to service its debt and to comply with debt covenants; the Company's ability to manage its private brand program for U.S. military commissaries; changes in the military commissary system, including its supply chain, or in the level of governmental funding; product recalls and other product-related safety concerns; changes in government regulations; and other risks and uncertainties listed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent Annual Report on Form 10-K and in subsequent filings with the Securities and Exchange Commission.

This section and the discussions contained in Item 1A "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022 and in Part I, Item 2 "Critical Accounting Policies" of this Quarterly Report on Form 10-Q, are intended to provide meaningful cautionary statements for purposes of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all the economic, competitive, governmental, technological and other factors that could adversely affect the Company's expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to SpartanNash or that SpartanNash currently believes are immaterial also may impair its business, operations, liquidity, financial condition and prospects. The Company undertakes no obligation to update or revise its forward-looking statements to reflect developments that occur, or information obtained after the date of this Quarterly Report.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Earnings	5

	Condensed Consolidated Statements of Comprehensive Income	6

	Condensed Consolidated Statements of Shareholders' Equity	7

	Condensed Consolidated Statements of Cash Flows	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	31

	Signatures	32

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, Unaudited)


	July 16,		January 1,
	2022		2022
Assets
Current assets
Cash and cash equivalents	$	21,217		$	10,666
Accounts and notes receivable, net		411,453			361,686
Inventories, net		591,609			522,324
Prepaid expenses and other current assets		72,258			62,517
Property and equipment held for sale		25,073			-
Total current assets		1,121,610			957,193

Property and equipment, net		557,754			577,359
Goodwill		182,160			181,035
Intangible assets, net		108,349			110,960
Operating lease assets		264,583			283,040
Other assets, net		87,863			97,195

Total assets	$	2,322,319		$	2,206,782

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	503,711		$	447,451
Accrued payroll and benefits		88,075			86,315
Other accrued expenses		59,902			67,893
Current portion of operating lease liabilities		46,297			47,845
Current portion of long-term debt and finance lease liabilities		6,303			6,334
Total current liabilities		704,288			655,838

Long-term liabilities
Deferred income taxes		74,497			63,692
Operating lease liabilities		247,230			266,701
Other long-term liabilities		28,706			38,292
Long-term debt and finance lease liabilities		473,876			399,390
Total long-term liabilities		824,309			768,075

Commitmentsand contingencies(Note 7)

Shareholders' equity
Common stock, voting, nopar value; 100,000shares authorized; 35,913and 35,948shares outstanding		489,957			493,783
Preferred stock, nopar value, 10,000shares authorized; noshares outstanding		-			-
Accumulated other comprehensive income (loss)		4,046			(1,455	)
Retained earnings		299,719			290,541
Total shareholders' equity		793,722			782,869

Total liabilities and shareholders' equity	$	2,322,319		$	2,206,782

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OFEARNINGS

(In thousands, except per share amounts)

(Unaudited)


	12 Weeks Ended		28 Weeks Ended
	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Net sales	$	2,273,890		$		2,106,560			$	5,037,548	$	4,764,359
Cost of sales		1,919,647				1,772,933				4,232,722		4,012,702
Gross profit		354,243				333,627				804,826		751,657

Operating expenses
Selling, general and administrative		338,867				304,248				761,049		692,185
Acquisition and integration		436				121				675		180
Restructuring and asset impairment, net		2,611				3,337				2,624		3,176
Total operating expenses		341,914				307,706				764,348		695,541

Operating earnings		12,329				25,921				40,478		56,116

Other expenses and (income)
Interest expense		4,528				3,267				8,713		7,856
Other, net		600				(10	)			384		(276	)
Total other expenses, net		5,128				3,257				9,097		7,580

Earnings before income taxes		7,201				22,664				31,381		48,536
Income tax expense		2,086				5,850				6,977		12,206
Net earnings	$	5,115		$		16,814			$	24,404	$	36,330

Basic net earnings per share:	$	0.14		$		0.47			$	0.69	$	1.02

Diluted net earnings per share:	$	0.14		$		0.47			$	0.67	$	1.01

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, Unaudited)


	12 Weeks Ended		28 Weeks Ended
	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Net earnings	$	5,115		$		16,814			$	24,404		$	36,330

Other comprehensive income, before tax
Postretirement liability adjustment		7,258				57				7,288			133

Income tax expense related to items of other comprehensive income		(1,780	)			(13	)			(1,787	)		(32	)

Total other comprehensive income, after tax		5,478				44				5,501			101
Comprehensive income	$	10,593		$		16,858			$	29,905		$	36,431

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, Unaudited)


							Accumulated
							Other
	Shares			Common			Comprehensive		Retained
	Outstanding			Stock			(Loss) Income		Earnings		Total
Balance at January 1, 2022		35,948			$	493,783		$	(1,455	)	$	290,541		$	782,869
Net earnings		-				-			-			19,289			19,289
Other comprehensive income		-				-			23			-			23
Dividends - $0.21per share		-				-			-			(7,665	)		(7,665	)
Stock-based employee compensation		-				4,295			-			-			4,295
Stock warrant		-				673			-			-			673
Issuances of common stock for associate stock purchase plan		3				108			-			-			108
Issuances of restricted stock		369				-			-			-			-
Cancellations of stock-based awards		(180	)			(4,288	)		-			-			(4,288	)
Balance at April 23, 2022		36,140			$	494,571		$	(1,432	)	$	302,165		$	795,304
Net earnings		-				-			-			5,115			5,115
Other comprehensive income		-				-			5,478			-			5,478
Dividends - $0.21per share		-				-			-			(7,561	)		(7,561	)
Share repurchases		(215	)			(6,573	)		-			-			(6,573	)
Stock-based employee compensation		-				1,397			-			-			1,397
Stock warrant		-				481			-			-			481
Issuances of common stock for associate stock purchase plan		4				104			-			-			104
Issuances of restricted stock		14				-			-			-			-
Cancellations of stock-based awards		(30	)			(23	)		-			-			(23	)
Balance at July 16, 2022		35,913			$	489,957		$	4,046		$	299,719		$	793,722

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED

(In thousands, Unaudited)


							Accumulated
							Other
	Shares			Common			Comprehensive		Retained
	Outstanding			Stock			Loss		Earnings		Total
Balance at January 2, 2021		35,851			$	491,819		$	(2,276	)	$	245,506		$	735,049
Net earnings		-				-			-			19,516			19,516
Other comprehensive income		-				-			57			-			57
Dividends - $0.20per share		-				-			-			(7,238	)		(7,238	)
Stock-based employee compensation		-				4,185			-			-			4,185
Stock warrant		-				645			-			-			645
Issuances of common stock for stock bonus plan and associate stock purchase plan		21				385			-			-			385
Issuances of restricted stock		523				-			-			-			-
Cancellations of stock-based awards		(129	)			(2,079	)		-			-			(2,079	)
Balance at April 24, 2021		36,266			$	494,955		$	(2,219	)	$	257,784		$	750,520
Net earnings		-				-			-			16,814			16,814
Other comprehensive income		-				-			44			-			44
Dividends - $0.20per share		-				-			-			(7,117	)		(7,117	)
Share repurchases		(265	)			(5,325	)		-			-			(5,325	)
Stock-based employee compensation		-				872			-			-			872
Stock warrant		-				430			-			-			430
Issuance of common stock for associate stock purchase plan		6				113			-			-			113
Issuances of restricted stock		27				-			-			-			-
Cancellations of stock-based awards		(91	)			(175	)		-			-			(175	)
Balance at July 17, 2021		35,943			$	490,870		$	(2,175	)	$	267,481		$	756,176

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)


	28 Weeks Ended
	July 16, 2022		July 17, 2021
Cash flows from operating activities
Net earnings	$	24,404		$	36,330
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash restructuring, asset impairment, and other charges		2,570			3,363
Depreciation and amortization		50,441			49,497
Non-cash rent		(2,462	)		(1,756	)
LIFO expense		28,032			4,557
Postretirement benefits expense		392			863
Deferred income taxes		9,071			8,714
Stock-based compensation expense		5,692			5,057
Stock warrant		1,154			1,075
Gain on disposals of assets		(131	)		(262	)
Other operating activities		1,051			508
Changes in operating assets and liabilities:
Accounts receivable		(49,528	)		(12,622	)
Inventories		(93,919	)		(1,537	)
Prepaid expenses and other assets		(128	)		(9,354	)
Accounts payable		67,874			(10,305	)
Accrued payroll and benefits		(369	)		(22,781	)
Current income taxes		(7,501	)		15,123
Other accrued expenses and other liabilities		(8,124	)		7,112
Net cash provided by operating activities		28,519			73,582
Cash flows from investing activities
Purchases of property and equipment		(46,431	)		(39,838	)
Net proceeds from the sale of assets		4,422			28,406
Acquisitions, net of cash acquired		(9,408	)		-
Loans to customers		-			(180	)
Payments from customers on loans		849			1,590
Other investing activities		(139	)		(16	)
Net cash used in investing activities		(50,707	)		(10,038	)
Cash flows from financing activities
Proceeds from senior secured credit facility		720,800			753,619
Payments on senior secured credit facility		(658,197	)		(787,996	)
Repayment of other long-term debt and finance lease liabilities		(3,771	)		(3,232	)
Share repurchases		(6,573	)		(5,325	)
Net payments related to stock-based award activities		(4,311	)		(2,254	)
Dividends paid		(15,165	)		(14,274	)
Other financing activities		(44	)		151
Net cash provided by (used in) financing activities		32,739			(59,311	)

Net increase in cash and cash equivalents		10,551			4,233
Cash and cash equivalents at beginning of period		10,666			19,903
Cash and cash equivalents at end of period	$	21,217		$	24,136

See accompanying notes to condensed consolidated financial statements.

SPARTANNASH COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Summary of Significant Accounting Policies and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of SpartanNash Company and its subsidiaries ("SpartanNash" or "the Company"). Intercompany accounts and transactions have been eliminated. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended January 1, 2022.

In the opinion of management, the accompanying condensed consolidated financial statements, taken as a whole, contain all adjustments, including normal recurring items, necessary to present fairly the financial position of SpartanNash as of July 16, 2022, and the results of its operations and cash flows for the interim periods presented. The preparation of the condensed consolidated financial statements and related notes to the financial statements requires management to make estimates. Estimates are based on historical experience, where applicable, and expectations of future outcomes which management believes are reasonable under the circumstances. Interim results are not necessarily indicative of results for a full year.

The unaudited information in the condensed consolidated financial statements for the second quarter and year-to-date periods of 2022 and 2021 include the results of operations of the Company for the 12- and 28-week periods ended July 16, 2022 and July 17, 2021, respectively.

Note 2 - Adoption of New Accounting Standards and Recently Issued Accounting Standards

As of July 16, 2022 and for the period then ended, there were no recently adopted accounting standards that had a material impact on the Company's condensed consolidated financial statements. There were no recently issued accounting standards not yet adopted which would have a material effect on the Company's condensed consolidated financial statements.

Note 3 - Revenue

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type of products and customers for each of the Company's reportable segments:


	12 Weeks Ended July 16, 2022		28 Weeks Ended July 16, 2022
(In thousands)	Food Distribution		Retail		Military		Total		Food Distribution	Retail		Military		Total
Type of products:
Center store (a)	$	369,727		$		252,016		$	230,218	$	851,961		$		843,091	$	547,072	$	524,507	$	1,914,670
Fresh (b)		369,179				258,288			142,187		769,654				816,132		558,167		323,288		1,697,587
Non-food (c)		353,857				104,510			108,311		566,678				774,592		235,941		240,715		1,251,248
Fuel		-				57,356			-		57,356				-		111,947		-		111,947
Other		25,542				235			2,464		28,241				55,347		557		6,192		62,096
Total	$	1,118,305		$		672,405		$	483,180	$	2,273,890		$		2,489,162	$	1,453,684	$	1,094,702	$	5,037,548
Type of customers:
Individuals	$	-		$		672,179		$	-	$	672,179		$		-	$	1,453,138	$	-	$	1,453,138
Manufacturers, brokers and distributors		15,955				-			446,162		462,117				36,380		-		1,010,893		1,047,273
Retailers		1,090,986				-			34,554		1,125,540				2,429,838		-		77,617		2,507,455
Other		11,364				226			2,464		14,054				22,944		546		6,192		29,682
Total	$	1,118,305		$		672,405		$	483,180	$	2,273,890		$		2,489,162	$	1,453,684	$	1,094,702	$	5,037,548

	12 Weeks Ended July 17, 2021		28 Weeks Ended July 17, 2021
(In thousands)	Food Distribution		Retail		Military		Total		Food Distribution	Retail		Military		Total
Type of products:
Center store (a)	$	339,057		$		238,504		$	205,075	$	782,636		$		790,834	$	527,222	$	487,137	$	1,805,193
Fresh (b)		362,922				242,209			129,772		734,903				810,130		525,244		299,464		1,634,838
Non-food (c)		328,361				99,601			92,811		520,773				731,056		227,737		221,868		1,180,661
Fuel		-				39,155			-		39,155				-		78,336		-		78,336
Other		26,186				508			2,399		29,093				58,588		882		5,861		65,331
Total	$	1,056,526		$		619,977		$	430,057	$	2,106,560		$		2,390,608	$	1,359,421	$	1,014,330	$	4,764,359
Type of customers:
Individuals	$	-		$		619,573		$	-	$	619,573		$		-	$	1,358,866	$	-	$	1,358,866
Manufacturers, brokers and distributors		16,201				-			400,971		417,172				34,413		-		945,355		979,768
Retailers		1,030,446				-			26,687		1,057,133				2,331,406		-		63,114		2,394,520
Other		9,879				404			2,399		12,682				24,789		555		5,861		31,205
Total	$	1,056,526		$		619,977		$	430,057	$	2,106,560		$		2,390,608	$	1,359,421	$	1,014,330	$	4,764,359

(a) Center store includes dry grocery, frozen and beverages.
(b) Fresh includes produce, meat, dairy, deli, bakery, prepared proteins, seafood and floral.
(c) Non-food includes general merchandise, health and beauty care, tobacco products and pharmacy.

Contract Assets and Liabilities

Under its contracts with customers, the Company stands ready to deliver product upon receipt of a purchase order. Accordingly, the Company has noperformance obligations under its contracts until its customers submit a purchase order. The Company does not receive pre-payment from its customers or enter into commitments to provide goods or services that have terms greater than one year. As the performance obligation is part of a contract that has an original expected duration of less than one year, the Company has applied the practical expedient under ASC 606, Revenue from Contracts with Customers, to omit disclosures regarding remaining performance obligations.

Revenue recognized from performance obligations related to prior periods (for example, due to changes in estimated rebates and incentives impacting the transaction price) was not material in any period presented.

For volume-based arrangements, the Company estimates the amount of the advanced funds earned by the retailers based on the expected volume of purchases by the retailer and amortizes the advances as a reduction of the transaction price and revenue earned. These advances are not considered contract assets under ASC 606 as they are not generated through the transfer of goods or services to the retailers. These advances are included in Other assets, net within the condensed consolidated balance sheets.

When the Company transfers goods or services to a customer, payment is due subject to normal terms and is not conditional on anything other than the passage of time. Typical payment terms range from due upon receipt to 30days, depending on the customer. At contract inception, the Company expects that the period of time between the transfer of goods to the customer and when the customer pays for those goods will be less than one year, which is consistent with the Company's standard payment terms. Accordingly, the Company has elected the practical expedient to not adjust for the effects of a significant financing component. As a result, these amounts are recorded as receivables and not contract assets. The Company had nocontract assets for any period presented.

The Company does not typically incur incremental costs of obtaining a contract that are contingent upon successful contract execution and would therefore be capitalized.

Allowance for Credit Losses

Changes to the balance of the allowance for credit losses were as follows:


	Allowance for Credit Losses
	Current Accounts		Long-term
(In thousands)	and Notes Receivable		Notes Receivable		Total
Balance at January 1, 2022	$	4,414		$		731	$	5,145
Changes in credit loss estimates		307				-		307
Write-offs charged against the allowance		(545	)			-		(545	)
Balance at July 16, 2022	$	4,176		$		731	$	4,907


	Allowance for Credit Losses
	Current Accounts		Long-term
(In thousands)	and Notes Receivable		Notes Receivable		Total
Balance at January 2, 2021	$	6,232		$		371	$	6,603
Changes in credit loss estimates		(1,092	)			360		(732	)
Write-offs charged against the allowance		(499	)			-		(499	)
Balance at July 17, 2021	$	4,641		$		731	$	5,372

Note 4 - Goodwill and Other Intangible Assets

The Company has three reportable segments; however, no goodwill exists within the Military segment. Changes in the carrying amount of goodwill were as follows:


(In thousands)	Food Distribution		Retail		Total
Balance at January 1, 2022	$	181,035		$		-	$	181,035
Acquisitions		-				1,125		1,125
Balance at July 16, 2022	$	181,035		$		1,125	$	182,160

The Company acquired goodwill within the Retail segment of $1.1million related to an immaterial acquisition during the 12weeks ended July 16, 2022.

The Company has indefinite-lived intangible assets that are not amortized, consisting primarily of indefinite-lived trade names and liquor licenses. The carrying amount of indefinite-lived intangible assets was $67.6million as of July 16, 2022 and January 1, 2022.

The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, during the fourth quarter of each year, and more frequently if circumstances indicate impairment is probable. Such circumstances have not arisen in the current fiscal year. Testing goodwill and other indefinite-lived intangible assets for impairment requires management to make significant estimates about the Company's future performance, cash flows, and other assumptions that can be affected by potential changes in economic, industry or market conditions, business operations, competition, or the Company's stock price and market capitalization.

Note 5 - Restructuring and Asset Impairment

The following table provides the activity of reserves for closed properties for the 28-week period ended July 16, 2022. Included in the liability are lease-related ancillary costs from the date of closure to the end of the remaining lease term, as well as related severance. Reserves for closed properties recorded in the condensed consolidated balance sheets are included in "Other accrued expenses" in Current liabilities and "Other long-term liabilities" in Long-term liabilities based on the timing of when the obligations are expected to be paid. Reserves for severance are recorded in "Accrued payroll and benefits".


	Reserves for Closed Properties
	Lease
	Ancillary
(In thousands)	Costs		Severance		Total
Balance at January 1, 2022	$	3,124		$		-		$	3,124
Provision for severance		-				9			9
Lease termination adjustments		(86	)			-			(86	)
Changes in estimates		(73	)			-			(73	)
Accretion expense		38				-			38
Payments		(534	)			(9	)		(543	)
Balance at July 16, 2022	$	2,469		$		-		$	2,469

Restructuring and asset impairment, net in the condensed consolidated statements of earnings consisted of the following:


	12 Weeks Ended		28 Weeks Ended
	July 16,		July 17,		July 16,			July 17,
(In thousands)	2022		2021		2022			2021
Asset impairment charges (a)	$	3,480		$		2,820			$	3,480		$	3,576
Provision for closing charges		-				827				-			1,410
Gain on sales of assets related to closed facilities (b)		(615	)			(326	)			(615	)		(2,185	)
Provision for severance		-				40				9			124
Other (income) costs associated with site closures (c)		(106	)			(24	)			(75	)		310
Lease termination adjustments (d)		(102	)			-				(102	)		-
Changes in estimates (e)		(46	)			-				(73	)		(59	)
Total	$	2,611		$		3,337			$	2,624		$	3,176

(a) Asset impairment charges in the current year related to restructuring of the Retail segment's e-commerce delivery model. In the prior year, asset impairment charges were incurred primarily in the Retail segment and relate to prior year store closures and previously closed locations.

(b) Gain on sales of assets in the current year primarily relates to the sales of real property of previously closed locations within the Retail segment. In the prior year, the gain on sales of assets primarily relates to the sales of pharmacy customer lists related to store closings in the Retail segment.

(c) Other income net activity in the current year primarily relate to restructuring activity within the Food Distribution segment and Retail store closings. In the prior year, other income net activity primarily related to Retail store closings and restructuring activity.

(d) Lease termination adjustments relate to the gain recognized to terminate a lease agreement in the current year, which includes a $16thousand write-off of the lease liability and $86thousand reduction of lease ancillary costs included in the reserve for closed properties.

(e) Changes in estimates primarily relate to revised estimates for turnover and other lease ancillary costs associated with previously closed locations, which were generally lower than the initial estimates at certain properties in all years presented.

Long-lived assets which are not recoverable are measured at fair value on a nonrecurring basis using Level 3 inputs under the fair value hierarchy, as further described in Note 6.In the current year, assets with a book value of $4.1million were measured at a fair value of $0.6million, resulting in impairment charges of $3.5million. In the prior year, long-lived assets with a book value of $22.5million were measured at a fair value of $18.9million, resulting in impairment charges of $3.6million. The fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, including the expected proceeds from the sale of assets, discounted using a risk-adjusted rate of interest. The Company estimates future cash flows based on historical results of operations, external factors expected to impact future performance, experience and knowledge of the geographic area in which the assets are located, and when necessary, uses real estate brokers.

The Company has evaluated assets held for sale as of July 16, 2022 and concluded that four previously closed facilities within the Food Distribution segment, with a carrying value of $24.2million, and one previously closed store within the Retail segment, with a carrying value of $0.9million, meet the requirements for held for sale classification within ASC 360. The assets have been classified as property and equipment held for sale in the condensed consolidated balance sheet. Liabilities with a carrying value of $0.5million are included as part of the disposal group. The Company expects the assets to be sold within one year.

Note 6 - Fair Value Measurements

ASC 820, Fair Value Measurement, prioritizes the inputs to valuation techniques used to measure fair value into the following hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity's own assumptions about the assumptions that market participants would use in pricing.

Financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts and notes receivable, and accounts payable approximate fair value because of the short-term maturities of these financial instruments. For discussion of the fair value measurements related to goodwill, and long- or indefinite-lived asset impairment charges, refer to Notes 4 and 5. At July 16, 2022 and January 1, 2022, the book value and estimated fair value of the Company's debt instruments, excluding debt financing costs, were as follows:


	July 16,		January 1,
(In thousands)	2022		2022
Book value of debt instruments, excluding debt financing costs:
Current maturities of long-term debt and finance lease liabilities	$	6,303		$	6,334
Long-term debt and finance lease liabilities		475,699			402,065
Total book value of debt instruments		482,002			408,399
Fair value of debt instruments, excluding debt financing costs		481,575			414,667
(Deficit) excess of fair value over book value	$	(427	)	$	6,268

The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities (Level 2 inputs and valuation techniques).

Note 7 - Commitments and Contingencies

The Company is engaged from time-to-time in routine legal proceedings incidental to its business. The Company does not believe that these routine legal proceedings, taken as a whole, will have a material impact on its business or financial condition. While the ultimate effect of such actions cannot be predicted with certainty, management believes that their outcome will not result in an adverse effect on the Company's consolidated financial position, operating results or liquidity.

The Company has contributed and is required to continue making contributions to the Central States Southeast and Southwest Pension Fund (the "Central States Plan" or the "Plan"), a multi-employer pension plan, based on obligations arising from certain of its collective bargaining agreements. If the Company were to cease making such contributions and triggered a withdrawal from the Plan, it is possible that the Company would be obligated to pay withdrawal liability to the Plan if the Plan is underfunded at the time of such withdrawal. Based on the most recent information available to the Company, management believes that the Plan's present value of actuarial accrued liabilities significantly exceeds the value of the assets held in the Plan's trust to pay benefits. Management is not aware of any facts that could give rise to any assessment of withdrawal liability against the Company or any significant change in funding levels in the Plan since January 1, 2022. Due to uncertainty regarding future factors that could trigger withdrawal liability, as well as the absence of specific information regarding matters such as the Plan's current financial situation, we are unable to determine with certainty the current amount of the Plan's underfunding and/or the Company's current potential withdrawal liability exposure in the event of a future withdrawal from the Plan. Any adjustment for withdrawal liability would be recorded when it is probable that a liability exists and can be reasonably determined.

On March 10, 2021, the United States Congress passed the American Rescue Plan Act of 2021 (the "Act"), which provides financial relief to certain failing multiemployer pension plans. In accordance with the interim guidance issued by the Pension Benefit Guaranty Corporation (the "PBGC") on July 9, 2021, the Act is designed to prevent such plans from becoming insolvent for the next 30years. On April 28, 2022, the Central States Plan submitted an application to the PBGC for relief. As the Central States Plan is in a critical and declining status, it is expected to qualify for relief under the Act. The PBGC has up to 120days from the date of submission to review the application. The legislation and the available relief are designed to alleviate the risk of insolvency of the Plan for the next 30 years.

Note 8 - Associate Retirement Plans

During the 12- and 28- week periods ended July 16, 2022, the Company recognized net periodic postretirement benefit expense of $0.7million and $0.9million, respectively, related to the SpartanNash Retiree Medical Plan ("Retiree Medical Plan" or "Plan"). During the 12- and 28- week periods ended July 17, 2021, the Company recognized net periodic postretirement benefit costs of $0.1million and $0.3million, respectively, related to the Retiree Medical Plan.

Effective June 30, 2022, the Company has amended the Retiree Medical Plan. In connection with the amendment, the Company will make lump sum cash payments to all active and retired participants in lieu of future monthly benefits and reimbursements previously offered under the Plan. As a result of the amendment, the Plan obligation was remeasured, resulting in a reduction to the obligation of $6.6million and a corresponding prior service credit in AOCI, which will be amortized to net periodic postretirement benefit income over the remaining period until the final payment on July 1, 2024. During the 12-weeks ended July 16, 2022, the Company recognized $0.1million in net periodic postretirement benefit income related to the amortization of the prior service credit from AOCI.

On July 1, 2022, the Company made lump sum payments to retired participants totaling $2.0million. The payments constituted a partial settlement of the Plan, which resulted in the recognition within net periodic postretirement expense of $0.7million related to the net actuarial loss within AOCI. The remaining payments which relate to active participants are expected to be made in two equal installments on or about July 1, 2023, and July 1, 2024.

Prior to the Plan amendment, the Company made total contributions of approximately $0.2million in the 28-weeks ended July 16, 2022 to the Retiree Medical Plan. The Company's retirement programs also include defined contribution plans providing contributory benefits, as well as executive compensation plans for a select group of management personnel and/or highly compensated associates.

In the first quarter of the current year, the Company realized a gain of $0.2million related to a refund from the annuity provider associated with an ineligible participant previously included in the terminated SpartanNash Company Pension Plan. These amounts are included in "Other, net" in the condensed consolidated statements of earnings.

Multi-Employer Plans

In addition to the plans listed above, the Company participates in the Central States Southeast and Southwest Pension Fund, the Michigan Conference of Teamsters and Ohio Conference of Teamsters Health and Welfare plans (collectively referred to as "multi-employer plans"), and other company-sponsored defined contribution plans for most associates covered by collective bargaining agreements.

With respect to the Company's participation in the Central States Plan, expense is recognized as contributions are payable. The Company's contributions during the 12-week periods ended July 16, 2022 and July 17, 2021 were $3.1million and $3.4million, respectively. The Company's contributions during the 28-week periods ended July 16, 2022 and July 17, 2021 were $6.9million and $8.0million, respectively. See Note 7 for further information regarding contingencies related to the Company's participation in the Central States Plan.

Note 9 - Income Taxes

The effective income tax rate was 29.0%and 25.8%for the 12 weeks ended July 16, 2022 and July 17, 2021, respectively. The effective income tax rate was 22.2% and 25.1% for the 28 weeks ended July 16, 2022 and July 17, 2021, respectively. The difference from the federal statutory rate in current quarter was primarily due to state taxes and non-deductible expenses, partially offset by tax benefits associated with federal tax credits. The difference in the federal statutory rate in the current year was primarily due to state taxes and non-deductible expenses, partially offset by tax benefits associated with federal tax credits and discrete tax benefits related to stock compensation. In the prior year, the difference from the federal statutory rate was primarily due to state taxes, partially offset by federal tax credits.

On March 27, 2020, the U.S. government enacted tax legislation to provide economic stimulus and support businesses and individuals during the COVID-19 pandemic, referred to as the CARES Act. In connection with the CARES Act, the Company recorded net discrete income tax benefits of $9.3million in 2020 associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act ("Tax Reform"), when the federal statutory income tax rate was 35%. In the first quarter of 2021, the Company received tax refunds totaling $25.7million related to the amended prior year returns.

Note 10 - Share-Based Payments

Share-Based Employee Awards

The Company sponsors shareholder-approved stock incentive plans that provide for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units, dividend equivalent rights, and other stock-based and stock-related awards to directors, officers and other key associates.

Share-based compensation expense recognized and included in "Selling, general and administrative expenses" in the condensed consolidated statements of earnings, and related tax impacts were as follows:


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Restricted stock expense	$	1,397		$		872			$	5,692		$	5,057
Income tax benefit		(458	)			(223	)			(3,048	)		(1,230	)
Restricted stock expense, net of tax	$	939		$		649			$	2,644		$	3,827

The following table summarizes activity in the stock incentive plans for the 28 weeks ended July 16, 2022:


				Weighted
	Restricted			Average
	Stock			Grant-Date
	Awards			Fair Value
Outstanding at January 1, 2022		1,031,837			$	17.56
Granted		383,285				28.58
Vested		(468,162	)			17.90
Cancelled/Forfeited		(65,575	)			20.06
Outstanding at July 16, 2022		881,385			$	21.98

As of July 16, 2022, total unrecognized compensation cost related to non-vested restricted stock awards granted under the Company's stock incentive plans is $11.3million and is expected to be recognized over a weighted average period of 2.2years.

Stock Warrant

On October 7, 2020, in connection with its entry into a commercial agreement with Amazon.com, Inc. ("Amazon"), the Company issued Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon, a warrant to acquire up to an aggregate of 5,437,272shares of the Company's common stock (the "Warrant"), subject to certain vesting conditions. Warrant shares equivalent to 2.5% of the Company's outstanding and issuable shares, or 1,087,455shares, vested upon the signing of the commercial agreement, and had a grant date fair value of $5.51per share. Warrant shares equivalent to up to 10.0% of the Company's outstanding and issuable shares, or 4,349,817shares, may vest in connection with conditions defined by the terms of the Warrant, as Amazon makes payments to the Company in connection with the commercial supply agreement, in increments of $200million, and had a grant date fair value of $5.33per share. Upon vesting, shares may be acquired at an exercise price of $17.7257. The right to purchase shares in connection with the Warrant expires on October 7, 2027.

Share-based payment expense recognized as a reduction of "Net sales" in the condensed consolidated statements of earnings, and related tax benefits were as follows:


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Warrant expense	$	481		$		430			$	1,154		$	1,075
Income tax benefit		(42	)			(37	)			(126	)		(95	)
Warrant expense, net of tax	$	439		$		393			$	1,028		$	980

The following table summarizes stock warrant activity for the 28 weeks ended July 16, 2022:


	Warrant
Outstanding and nonvested at January 1, 2022		3,914,833
Vested		(217,492	)
Outstanding and nonvested at July 16, 2022		3,697,341

As of July 16, 2022, total unrecognized cost related to non-vested warrant shares was $19.5million, which may be expensed as vesting conditions are satisfied over the remaining term of the agreement, or 5.2years. Warrants representing 1,739,931shares are vested and exercisable. As of July 16, 2022, nonvested warrant shares had an intrinsic value of $51.5million, and vested warrant shares had an intrinsic value of $24.2million.

Note 11 - Earnings Per Share

Outstanding nonvested restricted stock awards under the 2015 Stock Incentive Plan contain nonforfeitable rights to dividends or dividend equivalents, which participate in undistributed earnings with common stock. These awards are classified as participating securities and are included in the calculation of basic earnings per share. Awards under the 2020 Stock Incentive Plan do not contain nonforfeitable rights to dividends or dividend equivalents and are therefore not classified as participating securities. The dilutive impact of both the restricted stock awards and warrants are presented below, as applicable. The following table sets forth the computation of basic and diluted net earnings per share:


	12 Weeks Ended		28 Weeks Ended
(In thousands, except per share amounts)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Numerator:
Net earnings	$	5,115		$		16,814			$	24,404		$	36,330
Adjustment for earnings attributable to participating securities		(54	)			(305	)			(307	)		(736	)
Net earnings used in calculating earnings per share	$	5,061		$		16,509			$	24,097		$	35,594
Denominator:
Weighted average shares outstanding, including participating securities		35,564				35,693				35,565			35,734
Adjustment for participating securities		(373	)			(648	)			(448	)		(724	)
Shares used in calculating basic earnings per share		35,191				35,045				35,117			35,010
Effect of dilutive stock warrant		789				134				735			112
Effect of dilutive restricted stock awards		175				63				170			44
Shares used in calculating diluted earnings per share		36,155				35,242				36,022			35,166
Basic earnings per share	$	0.14		$		0.47			$	0.69		$	1.02
Diluted earnings per share	$	0.14		$		0.47			$	0.67		$	1.01

Note 12 - Supplemental Cash Flow Information

Supplemental cash flow information is as follows:


	28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021
Non-cash investing activities:
Capital expenditures included in accounts payable	$	3,574		$	1,990
Operating lease asset additions		9,353			348
Finance lease asset additions		15,386			1,721
Non-cash financing activities:
Dividends declared but unpaid		62			131
Recognition of operating lease liabilities		9,353			348
Recognition of finance lease liabilities		15,386			1,721
Other supplemental cash flow information:
Cash paid for interest		7,148			6,924

Note 13 - Reporting Segment Information

The following tables set forth information about the Company by reporting segment:


(In thousands)	Food Distribution		Retail		Military			Total
12 Weeks Ended July 16, 2022
Net sales to external customers	$	1,118,305		$		672,405			$	483,180		$	2,273,890
Inter-segment sales		279,232				240				-			279,472
Acquisition and integration		-				436				-			436
Restructuring and asset impairment, net		(139	)			2,750				-			2,611
Depreciation and amortization		7,866				10,740				3,362			21,968
Operating earnings (loss)		12,961				(368	)			(264	)		12,329
Capital expenditures		4,360				8,533				3,600			16,493

12 Weeks Ended July 17, 2021
Net sales to external customers	$	1,056,526		$		619,977			$	430,057		$	2,106,560
Inter-segment sales		269,627				245				-			269,872
Acquisition and integration		-				121				-			121
Restructuring and asset impairment, net		781				2,556				-			3,337
Depreciation and amortization		7,604				10,685				3,117			21,406
Operating earnings (loss)		16,678				12,711				(3,468	)		25,921
Capital expenditures		4,437				8,542				4,735			17,714

28 Weeks Ended July 16, 2022
Net sales to external customers	$	2,489,162		$		1,453,684			$	1,094,702		$	5,037,548
Inter-segment sales		623,252				401				-			623,653
Acquisition and integration		-				675				-			675
Restructuring and asset impairment, net		(128	)			2,752				-			2,624
Depreciation and amortization		17,958				24,929				7,554			50,441
Operating earnings (loss)		39,645				(341	)			1,174			40,478
Capital expenditures		17,460				21,206				7,765			46,431

28 Weeks Ended July 17, 2021
Net sales to external customers	$	2,390,608		$		1,359,421			$	1,014,330		$	4,764,359
Inter-segment sales		580,258				418				-			580,676
Acquisition and integration		-				180				-			180
Restructuring and asset impairment, net		763				2,413				-			3,176
Depreciation and amortization		17,394				24,926				7,177			49,497
Operating earnings (loss)		37,824				26,903				(8,611	)		56,116
Capital expenditures		14,393				17,677				7,768			39,838


	July 16,		January 1,
(In thousands)	2022		2022
Total Assets
Food Distribution	$	1,163,598		$	1,092,851
Retail		758,462			747,342
Military		400,259			366,589
Total	$	2,322,319		$	2,206,782

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q, the information contained under the caption "Forward-Looking Statements," which appears at the beginning of this report, and the information in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

Overview

SpartanNash, headquartered in Grand Rapids, Michigan, is a food solutions company that delivers the ingredients for a better life. As a distributor, wholesaler and retailer with a global supply chain network, SpartanNash customers span a diverse group of national accounts, independent and chain grocers, e-commerce retailers, U.S. military commissaries and exchanges, and the Company's own brick-and-mortar grocery stores, pharmacies and fuel centers. SpartanNash distributes grocery and household goods, including fresh produce and its Our Family®portfolio of products, to locations in all 50 states. The Company operates three reportable business segments: Food Distribution, Retail and Military.

The Company's Food Distribution segment provides a wide variety of nationally branded and private brand grocery products and perishable food products to independent grocers, the Company's corporate owned retail stores, national retailers, food service distributors, and other customers.

As of the end of the second quarter, the Company's Retail segment operated 148 corporate owned retail stores in the Midwest region primarily under the banners of Family Fare, Martin's Super Markets and D&W Fresh Market.The Company also offered pharmacy services in 91 of its corporate owned retail stores and operated 36 fuel centers. The Company's neighborhood market strategy distinguishes its corporate owned retail stores from supercenters and limited assortment stores.

The Company's Military segment contracts with manufacturers to distribute a wide variety of grocery products primarily to military commissaries and exchanges located in the United States, in addition to the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar, Djibouti, Korea and Japan. The Company distributes grocery products to 160 military commissaries and over 400 exchanges and, together with its third-party partner, Coastal Pacific Food Distributors, represents the only delivery solution to service the Defense Commissary Agency ("DeCA") worldwide. The Company is the exclusive worldwide supplier of private brand products to U.S. military commissaries, a partnership with DeCA which began in fiscal 2017.

All fiscal quarters are 12 weeks, except for the Company's first quarter, which is 16 weeks and will generally include the Easter holiday. The fourth quarter includes the Thanksgiving and Christmas holidays, and depending on the fiscal year end, may include the New Year's holiday.

The majority of the Company's revenues are not seasonal in nature. However, in certain geographic areas, corporate retail stores and independent retail customers are dependent on tourism, and therefore, are affected by seasons and weather patterns.

2022 Second Quarter Highlights

Key financial and operational highlights for the second quarter include the following:

•

Net sales of $2.3 billion, increased 7.9%, compared to $2.1 billion in the prior year quarter.

•

Retail comparable sales increased 6.5% for the quarter.

•

Net earnings of $5.1 million, compared to $16.8 million in the prior year quarter.

•

Adjusted EBITDA of $61.8 million, a significant increase of 13.7%, compared to $54.4 million in the prior year quarter.

•

The Company continued to make additional progress on its Supply Chain Transformation, concluding the quarter with a 9% improvement in throughput rate year-over-year.

During August 2022, the Company increased fiscal 2022 guidance, including net sales, adjusted EBITDA, and interest expense ranges. Adjusted EBITDA is now expected to range from $227 million to $240 million, which is inclusive of the net incremental costs associated with the Merchandising Transformation initiative, currently estimated to be between $11.0 million to $14.0 million. The Company also now expects net sales to range from $9.3 billion to $9.6 billion, with Military sales expected to range from 5.0% to 8.0%. Food Distribution sales are now expected to increase 4.0% to 7.0%, while Retail comparable sales are now expected to range from 4.0% to 7.0% for 2022. The interest expense is now expected to range from $19 million to $21 million.

Results of Operations

The following table sets forth items from the condensed consolidated statements of earnings as a percentage of net sales and the year-to-year percentage change in the dollar amounts:


	Percentage of Net Sales		Percentage Change
	12 Weeks Ended		28 Weeks Ended		12 Weeks Ended	28 Weeks Ended
	July 16, 2022		July 17, 2021		July 16, 2022	July 17, 2021	July 16, 2022		July 16, 2022
Net sales		100.0		100.0		100.0		100.0			7.9			5.7
Gross profit		15.6		15.8		16.0		15.8			6.2			7.1
Selling, general and administrative		14.9		14.4		15.1		14.5			11.4			9.9
Acquisition and integration		0.0		0.0		0.0		0.0		**			**
Restructuring charges and asset impairment, net		0.1		0.2		0.1		0.1			(21.8	)		(17.4	)
Operating earnings		0.5		1.2		0.8		1.2			(52.4	)		(27.9	)
Other expenses		0.2		0.2		0.2		0.2			57.4			20.0
Earnings before income taxes		0.3		1.1		0.6		1.0			(68.2	)		(35.3	)
Income tax expense		0.1		0.3		0.1		0.3			(64.3	)		(42.8	)
Net earnings		0.2		0.8		0.5		0.8			(69.6	)		(32.8	)

Note: Certain totals do not sum due to rounding.

** Not meaningful

Net Sales - The following table presents net sales by segment and variances in net sales:


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		Variance		July 16, 2022		July 17, 2021	Variance
Food Distribution	$	1,118,305		$		1,056,526		$	61,779	$	2,489,162	$	2,390,608	$	98,554
Retail		672,405				619,977			52,428		1,453,684		1,359,421		94,263
Military		483,180				430,057			53,123		1,094,702		1,014,330		80,372
Total net sales	$	2,273,890		$		2,106,560		$	167,330	$	5,037,548	$	4,764,359	$	273,189

Net sales for the quarter ended July 16, 2022 (the "second quarter") increased $167.3 million, or 7.9%, to $2.27 billion from $2.11 billion in the quarter ended July 17, 2021 (the "prior year quarter"). Net sales for the year-to-date period ended July 16, 2022 (the "year-to-date period") increased $273.2 million, or 5.7%, to $5.04 billion from $4.76 billion in the year-to-date period ended July 17, 2021 (the "prior-year-to-date period"). The increase was attributable to increases in net sales in all three segments that were favorably impacted by inflation. Additionally, the second quarter increase compared to the prior year quarter was also impacted by an increase in case volume of 3.3% within the Military segment.

Food Distribution net sales increased $61.8 million, or 5.8%, to $1.12 billion in the second quarter from $1.06 billion in the prior year quarter. Net sales for the year-to-date period increased $98.6 million, or 4.1%, to $2.49 billion from $2.39 billion in the prior year-to-date period. The increases in net sales were due primarily to the inflationary impact on pricing.

Retail net sales increased $52.4 million, or 8.5%, to $672.4 million in the second quarter from $620.0 million in the prior year quarter. Net sales for the year-to-date period increased $94.3 million, or 6.9%, from $1.36 billion in the prior year-to-date period to $1.45 billion. The increases were primarily due to inflationary pricing and share gains. Comparable store sales increased 6.5% for the quarter. The Company defines a retail store as comparable when it is in operation for 14 accounting periods (a period equals four weeks), regardless of remodels, expansions, or relocated stores. Acquired stores are included in the comparable sales calculation 13 periods after the acquisition date. Sales are compared to the same store's operations from the prior year period for purposes of calculation of comparable store sales. Fuel is excluded from the comparable sales calculation due to volatility in price. Comparable store sales is a widely used metric among retailers, which is useful to management and investors to assess performance. The Company's definition of comparable store sales may differ from similarly titled measures at other companies.

Military net sales increased $53.1 million, or 12.4%, to $483.2 million in the second quarter from $430.1 million in the prior year quarter. Net sales for the year-to-date period increased $80.4 million, or 7.9%, from $1.01 billion in the prior year-to-date period to $1.09 billion. The second quarter increase was primarily related to inflation as well as an increase in case volume. The year-to-date increase was primarily due to inflation.

Gross Profit- Gross profit represents net sales less cost of sales, which for all non-production operations includes purchase costs, in-bound freight, physical inventory adjustments, markdowns and promotional allowances and excludes warehousing costs, depreciation and other administrative expenses. The Company's gross profit definition may not be identical to similarly titled measures reported by other companies. Vendor allowances that relate to the buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for the Company's merchandising costs, such as setting up warehouse infrastructure. Vendor allowances are recognized as a reduction in cost of sales when the product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms. The distribution segments include shipping and handling costs in the Selling, general and administrative section of operating expenses in the consolidated statements of earnings.

Gross profit increased $20.6 million, or 6.2%, to $354.2 million in the second quarter from $333.6 million in the prior year quarter. As a percent of net sales, gross profit was 15.6% compared to 15.8% in the prior year quarter. Gross profit for the year-to-date period increased $53.2 million, or 7.1%, from $751.7 billion in the prior year-to-date period to $804.8 billion in the current year. As a percent of net sales, gross profit for the year-to-date period was 16.0% compared to 15.8% in the prior year-to-date period. The gross profit rate decline in the current quarter was driven by lower Retail margins. Approximately one third of the decline in the current quarter was due to lower Retail fuel margins compared to the prior year quarter. The gross profit rate decline was partially offset by improvements in gross profit rates within both the Food Distribution and Military segments. Additionally, LIFO expense increased $14.9 million, or 65 basis points compared to the prior year quarter. Gross profit rate growth in the year-to-date period was driven by improvements in margin rates in the Food Distribution and Military segments, partially offset by an increase in LIFO expense of $23.5 million, as well as a lower gross profit rate within Retail.

Selling, General and Administrative Expenses- Selling, general and administrative ("SG&A") expenses consist primarily of operating costs related to retail and supply chain operations, including salaries and wages, employee benefits, facility costs, shipping and handling, equipment rental, depreciation, and out-bound freight, in addition to corporate administrative expenses.

SG&A expenses for the second quarter increased $34.6 million, or 11.4%, to $338.9 million from $304.2 million in the prior year quarter, representing 14.9% of net sales in the second quarter compared to 14.4% in the prior year quarter. SG&A expense for the year-to-date period increased $68.9 million, or 9.9% to $761.0 million from $692.2 million in the prior year-to-date, representing 15.1% in the current year-to-date period compared to 14.5% as a percentage of net sales in the prior year-to-date period. The increase in operating expenses as a percentage of sales was due to higher corporate administrative costs, including higher incentive compensation expense and costs related to shareholder activism, in addition to higher fuel costs. The increase in operating expenses was partially offset by efficiencies realized from the Supply Chain Transformation initiative.

Acquisition and Integration- Acquisition and integration expenses for the second quarter ended July 16, 2022 and July 17, 2021 were $0.4 million and $0.1 million, respectively. Acquisition and integration expenses for the year-to-date periods ended July 16, 2022 and July 17, 2021 were $0.7 million and $0.2 million, respectively. Current year expense is primarily related to an acquisition within the Retail segment. Prior year expense was associated with the integration of Martin's Super Markets.

Restructuring and Asset Impairment, net -Second quarter and prior year quarter results included charges of $2.6 million and $3.3 million, respectively. The year-to-date period and the prior year-to-date period included charges of $2.6 million and $3.2 million, respectively. The current quarter and current year amounts primarily consist of asset impairment charges related to restructuring of the Retail segment's ecommerce delivery model, partially offset by a gain on sales of assets related to the sale of real property of previously closed locations in the Retail segment. The prior year quarter and prior year-to-date amounts consist primarily of retail store closing and asset impairment charges, partially offset by gains on the sale of pharmacy customer lists.

Operating Earnings - The following table presents operating earnings (loss) by segment and variances in operating earnings (loss).


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		Variance			July 16, 2022		July 17, 2021		Variance
Food Distribution	$	12,961		$		16,678			$	(3,717	)	$	39,645		$	37,824		$	1,821
Retail		(368	)			12,711				(13,079	)		(341	)		26,903			(27,244	)
Military		(264	)			(3,468	)			3,204			1,174			(8,611	)		9,785
Total operating earnings	$	12,329		$		25,921			$	(13,592	)	$	40,478		$	56,116		$	(15,638	)

Operating earnings decreased $13.6 million, or 52.4% to $12.3 million in the second quarter from $25.9 million in the prior year quarter. Operating earnings for the year-to-date period decreased $15.6 million, or 27.9%, to $40.5 million from $56.1 million in the prior year-to-date period. The decreases in operating earnings were due to the changes in net sales, gross profit and operating expenses discussed above.

Food Distribution operating earnings decreased $3.7 million, or 22.3%, to $13.0 million in the second quarter from $16.7 million in the prior year quarter. Operating earnings for the year-to-date period increased $1.8 million, or 4.8%, to $39.6 million from $37.8 million in the prior year-to-date period. The decrease in operating earnings for Food Distribution in the second quarter was due to increases in corporate administrative costs, partially offset by a higher gross margin rate. The increase in the operating earnings for Food Distribution in the year-to-date period was due to a higher gross margin rate, partially offset by an increase in corporate administrative costs.

Retail operating earnings decreased $13.1 million, or 102.9% to a $0.4 million operating loss in the second quarter from $12.7 million in operating earnings in the prior year quarter. Operating earnings for the year-to-date period decreased $27.2 million, or 101.3%, to a $0.3 million operating loss from $26.9 million in operating earnings in the prior year-to-date period. The decrease in operating earnings was due to a lower gross profit rate, along with increased corporate administrative, utilities and supplies costs.

Military operating loss decreased $3.2 million, or 92%, to $0.3 million in the second quarter from a loss of $3.5 million in the prior year quarter. Operating earnings for the year-to-date period increased $9.8 million, or 113.6%, to $1.2 million from a $8.6 million operating loss in the prior year-to-date period. The second quarter increase in operating earnings was due to a higher margin rate and increased case volumes, partially offset by increased corporate administrative costs. The year-to-date increase in operating earnings was due a higher gross margin rate, partially offset by an increase in corporate administrative costs and higher supply chain wages.

Interest Expense- Interest expense increased $1.3 million, or 38.6%, to $4.5 million in the second quarter from $3.3 million in the prior year quarter. Interest expense for the year-to-date period increased $0.9 million, or 10.9%, from $7.9 million in the prior year-to-date period to $8.7 million. The increase in interest expense was due to increases in the federal funds rate and the average debt balance.

Income Taxes- The effective income tax rates were 29.0% and 25.8% for the second quarter and prior year quarter, respectively. For the year-to-date period and prior year-to-date period, the effective tax rates were 22.2% and 25.1%, respectively. The difference from the federal statutory rate in current quarter was primarily due to state taxes and non-deductible expenses, partially offset by tax benefits associated with federal tax credits. The difference in the federal statutory rate in the current year was primarily due to state taxes and non-deductible expenses, partially offset by tax benefits associated with federal tax credits and discrete tax benefits related to stock compensation. In the prior year, the difference from the federal statutory rate was primarily due to state taxes, partially offset by federal tax credits.

On March 27, 2020, the U.S. government enacted tax legislation to provide economic stimulus and support businesses and individuals during the COVID-19 pandemic, referred to as the CARES Act. In connection with the CARES Act, the Company recorded a net discrete income tax benefit of $9.3 million in 2020, associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act, when the federal statutory income tax rate was 35%. In the first quarter of 2021, the Company received tax refunds totaling $25.7 million related to the amended prior year returns.

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, as well as per diluted share ("adjusted EPS"), 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.

At the beginning of 2022, the Company made a change to the adjusted operating earnings and adjusted earnings from continuing operations measures to exclude the impact of LIFO expense or benefit. The Company believes the change reduces volatility associated with temporary fluctuations in inflation, enabling investors to best establish a basis for expected performance and the ability to evaluate actual results against that expectation and the industry in which the Company operates. Prior year adjusted operating earnings and adjusted earnings from continuing operations figures have been restated to align with this change in presentation. Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude, among other items, LIFO expense, costs related to shareholder activism, operating and non-operating costs associated with the postretirement plan amendment and settlement, organizational realignment and severance associated with cost reduction initiatives. Costs related to shareholder activism include consulting, legal, and other expenses incurred in relation to shareholder activism activities. Costs related to the postretirement plan amendment and settlement include non-operating expenses associated with recognition of plan settlement losses and amortization of the prior service credit related to the amendment of the retiree medical plan, which are adjusted out of adjusted earnings from continuing operations. Postretirement plan amendment and settlement costs also include operating expenses related to payroll taxes which are adjusted out of all non-GAAP financial measures. Organizational realignment includes benefits for associates terminated as part of leadership transition plans, 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, among other things, LIFO expense, organizational realignment and severance associated with cost reduction initiatives.

Each of these items are considered "non-operational" or "non-core" in nature.

Adjusted Operating Earnings

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.

The Company believes that adjusted operating earnings provide a meaningful representation of its operating performance for the Company as a whole and for its operating segments. 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 all of its 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 and adjusted operating earnings by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in an adjusted operating earnings format.

Adjusted operating earnings is not a measure of performance under GAAP 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.

Following is a reconciliation of operating earnings to adjusted operating earnings for the 12 and 28 weeks ended July 16, 2022 and July 17, 2021.


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Operating earnings	$	12,329		$		25,921			$	40,478	$	56,116
Adjustments:
LIFO expense		17,845				2,902				28,032		4,557
Acquisition and integration		436				121				675		180
Restructuring and asset impairment, net		2,611				3,337				2,624		3,176
Organizational realignment, net		252				(52	)			1,271		589
Severance associated with cost reduction initiatives		495				13				741		138
Postretirement plan amendment and settlement		133				-				133		-
Costs related to shareholder activism		3,864				-				7,335		-
Adjusted operating earnings	$	37,965		$		32,242			$	81,289	$	64,756

Following is a reconciliation of operating earnings (loss) by segment for the 12 and 28 weeks ended July 16, 2022 and July 17, 2021.


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Food Distribution:
Operating earnings	$	12,961		$		16,678			$	39,645		$	37,824
Adjustments:
LIFO expense		9,640				1,626				15,368			2,420
Restructuring and asset impairment, net		(139	)			781				(128	)		763
Organizational realignment, net		118				(26	)			601			287
Severance associated with cost reduction initiatives		39				4				130			103
Postretirement plan amendment and settlement		63				-				63			-
Costs related to shareholder activism		1,829				-				3,471			-
Adjusted operating earnings	$	24,511		$		19,063			$	59,150		$	41,397
Retail:
Operating (loss) earnings	$	(368	)	$		12,711			$	(341	)	$	26,903
Adjustments:
LIFO expense		3,941				477				5,853			892
Acquisition and integration		436				121				675			180
Restructuring and asset impairment, net		2,750				2,556				2,752			2,413
Organizational realignment, net		96				(19	)			478			215
Severance associated with cost reduction initiatives		-				-				122			29
Postretirement plan amendment and settlement		50				-				50			-
Costs related to shareholder activism		1,453				-				2,758			-
Adjusted operating earnings	$	8,358		$		15,846			$	12,347		$	30,632
Military:
Operating (loss) earnings	$	(264	)	$		(3,468	)		$	1,174		$	(8,611	)
Adjustments:
LIFO expense		4,264				799				6,811			1,245
Organizational realignment, net		38				(7	)			192			87
Severance associated with cost reduction initiatives		456				9				489			6
Postretirement plan amendment and settlement		20				-				20			-
Costs related to shareholder activism		582				-				1,106			-
Adjusted operating earnings (loss)	$	5,096		$		(2,667	)		$	9,792		$	(7,273	)

Adjusted Earnings from Continuing Operations

Adjusted earnings from continuing operations, as well as per diluted share ("adjusted EPS"), 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.

The Company believes that adjusted earnings from continuing operations provide a meaningful representation of its operating performance for the Company. The Company considers adjusted earnings from continuing operations as an additional way to measure operating performance on an ongoing basis. Adjusted earnings from continuing operations is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered "non-operating" or "non-core" in nature, and excludes the contributions of activities classified as discontinued operations. Because adjusted earnings from continuing operations 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 both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted earnings from continuing operations format.

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.

Following is a reconciliation of net earnings to adjusted earnings from continuing operations for the 12 and 28 weeks ended July 16, 2022 and July 17, 2021.


	12 Weeks Ended
	July 16, 2022		July 17, 2021
			per diluted				per diluted
(In thousands, except per share amounts)	Earnings		share		Earnings		share
Net earnings	$	5,115		$		0.14		$		16,814	$	0.47
Adjustments:
LIFO expense		17,845							2,902
Acquisition and integration		436							121
Restructuring and asset impairment, net		2,611							3,337
Organizational realignment, net		252							(52	)
Severance associated with cost reduction initiatives		495							13
Postretirement plan amendment and settlement		745							-
Costs related to shareholder activism		3,864							-
Total adjustments		26,248							6,321
Income tax effect on adjustments (a)		(7,211	)						(1,600	)
Total adjustments, net of taxes		19,037				0.52				4,721		0.13
Adjusted earnings from continuing operations	$	24,152		$		0.66		$		21,535	$	0.60


	28 Weeks Ended
	July 16, 2022		July 17, 2021
			per diluted				per diluted
(In thousands, except per share amounts)	Earnings		share		Earnings		share
Net earnings	$	24,404		$		0.67		$		36,330	$	1.01
Adjustments:
LIFO expense		28,032							4,557
Acquisition and integration		675							180
Restructuring and asset impairment, net		2,624							3,176
Organizational realignment, net		1,271							589
Severance associated with cost reduction initiatives		741							138
Pension refund from annuity provider		(200	)						-
Postretirement plan amendment and settlement		745							-
Costs related to shareholder activism		7,335							-
Total adjustments		41,223							8,640
Income tax effect on adjustments (a)		(11,145	)						(2,166	)
Total adjustments, net of taxes		30,078				0.82				6,474		0.18
Adjusted earnings from continuing operations		54,482				1.49				42,804		1.19

(a)

The income tax effect on adjustments is computed by applying the effective tax rate, before discrete tax items, to the total adjustments for the period.

Adjusted EBITDA

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("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.

The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company and for its operating segments. The Company considers 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 all of its 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 and adjusted EBITDA by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted EBITDA format.

Adjusted EBITDA and adjusted EBITDA by segment are not measures of performance under GAAP 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.

Following is a reconciliation of net earnings to adjusted EBITDA for the 12 and 28 weeks ended July 16, 2022 and July 17, 2021.


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Net earnings	$	5,115		$		16,814			$	24,404		$	36,330
Income tax expense		2,086				5,850				6,977			12,206
Other expenses, net		5,128				3,257				9,097			7,580
Operating earnings		12,329				25,921				40,478			56,116
Adjustments:
LIFO expense		17,845				2,902				28,032			4,557
Depreciation and amortization		21,968				21,406				50,441			49,497
Acquisition and integration		436				121				675			180
Restructuring and asset impairment, net		2,611				3,337				2,624			3,176
Cloud computing amortization		869				478				1,769			958
Organizational realignment, net		252				(52	)			1,271			589
Severance associated with cost reduction initiatives		495				13				741			138
Stock-based compensation		1,397				974				5,838			5,164
Stock warrant		481				430				1,154			1,075
Non-cash rent		(839	)			(1,091	)			(1,927	)		(1,986	)
Gain on disposal of assets		(54	)			(80	)			(131	)		(262	)
Postretirement plan amendment and settlement		133				-				133			-
Costs related to shareholder activism		3,864				-				7,335			-
Adjusted EBITDA	$	61,787		$		54,359			$	138,433		$	119,202

Following is a reconciliation of operating earnings (loss) to adjusted EBITDA by segment for the 12 and 28 weeks ended July 16, 2022 and July 17, 2021.


	12 Weeks Ended		28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021		July 16, 2022			July 17, 2021
Food Distribution:
Operating earnings	$	12,961		$		16,678			$	39,645		$	37,824
Adjustments:
LIFO expense		9,640				1,626				15,368			2,420
Depreciation and amortization		7,866				7,604				17,958			17,394
Restructuring and asset impairment, net		(139	)			781				(128	)		763
Cloud computing amortization		483				283				1,033			517
Organizational realignment, net		118				(26	)			601			287
Severance associated with cost reduction initiatives		39				4				130			103
Stock-based compensation		658				436				2,781			2,365
Stock warrant		481				430				1,154			1,075
Non-cash rent		7				143				32			917
Loss (gain) on disposal of assets		1				(62	)			(77	)		(99	)
Postretirement plan amendment and settlement		63				-				63			-
Costs related to shareholder activism		1,829				-				3,471			-
Adjusted EBITDA	$	34,007		$		27,897			$	82,031		$	63,566
Retail:
Operating (loss) earnings	$	(368	)	$		12,711			$	(341	)	$	26,903
Adjustments:
LIFO expense		3,941				477				5,853			892
Depreciation and amortization		10,740				10,685				24,929			24,926
Acquisition and integration		436				121				675			180
Restructuring and asset impairment, net		2,750				2,556				2,752			2,413
Cloud computing amortization		290				139				541			314
Organizational realignment, net		96				(19	)			478			215
Severance associated with cost reduction initiatives		-				-				122			29
Stock-based compensation		494				390				1,989			1,870
Non-cash rent		(746	)			(1,145	)			(1,731	)		(2,697	)
Loss (gain) on disposal of assets		18				(2	)			27			(125	)
Postretirement plan amendment and settlement		50				-				50			-
Costs related to shareholder activism		1,453				-				2,758			-
Adjusted EBITDA	$	19,154		$		25,913			$	38,102		$	54,920
Military:
Operating (loss) earnings	$	(264	)	$		(3,468	)		$	1,174		$	(8,611	)
Adjustments:
LIFO expense		4,264				799				6,811			1,245
Depreciation and amortization		3,362				3,117				7,554			7,177
Cloud computing amortization		96				56				195			127
Organizational realignment, net		38				(7	)			192			87
Severance associated with cost reduction initiatives		456				9				489			6
Stock-based compensation		245				148				1,068			929
Non-cash rent		(100	)			(89	)			(228	)		(206	)
Gain on disposal of assets		(73	)			(16	)			(81	)		(38	)
Postretirement plan amendment and settlement		20				-				20			-
Costs related to shareholder activism		582				-				1,106			-
Adjusted EBITDA	$	8,626		$		549			$	18,300		$	716

Liquidity and Capital Resources

Cash Flow Information

The following table summarizes the Company's consolidated statements of cash flows:


	28 Weeks Ended
(In thousands)	July 16, 2022		July 17, 2021
Cash flow activities
Net cash provided by operating activities	$	28,519		$	73,582
Net cash used in investing activities		(50,707	)		(10,038	)
Net cash provided by (used in) financing activities		32,739			(59,311	)
Net increase in cash and cash equivalents		10,551			4,233
Cash and cash equivalents at beginning of the period		10,666			19,903
Cash and cash equivalents at end of the period	$	21,217		$	24,136

Net cash provided by operating activities. Net cash provided by operating activities decreased $45.1 million in the current year-to-date period compared to the prior year-to-date period, primarily due to changes in working capital in the current year.

Net cash used in investing activities. Net cash used in investing activities increased $40.7 million in the current year compared to the prior year primarily due to significant proceeds from the sale of fixed assets in the prior year and an acquisition within the Retail segment in the current year.

Capital expenditures were $46.4 million in the current year and cloud computing application development spend, which is included in operating activities, was $3.2 million, compared to capital expenditures of $39.8 million and cloud computing application development spend of $4.0 million in the prior year. The Company expects fiscal year 2022 capital expenditures and cloud computing application development spend to range from $100.0 million to $110.0 million. The Food Distribution, Retail and Military segments utilized 37.6%, 45.7% and 16.7% of capital expenditures, respectively, in the current year.

Net cash provided by financing activities. Net cash provided by financing activities increased $92.1 million in the current year compared to the prior year, primarily due to increased net borrowings on the senior credit facility in the current year.

Debt Management

Total debt, including finance lease liabilities, was $480.2 million and $405.7 million as of July 16, 2022 and January 1, 2022, respectively. The increase in total debt was due to additional net borrowings on the senior credit facility to fund working capital changes.

Liquidity

The Company's principal sources of liquidity are cash flows generated from operations and its senior secured credit facility. As of July 16, 2022, the senior secured credit facility had outstanding borrowings of $422.2 million. Additional available borrowings under the Company's credit facility are based on stipulated advance rates on eligible assets, as defined in the Credit Agreement. The Credit Agreement requires that the Company maintain excess availability of 10% of the borrowing base, as such term is defined in the Credit Agreement. The Company had excess availability after the 10% covenant of $469.2 million at July 16, 2022. Payment of dividends and repurchases of outstanding shares are permitted, provided that certain levels of excess availability are maintained. The credit facility provides for the issuance of letters of credit, of which $17.7 million were outstanding as of July 16, 2022. The credit facility matures December 18, 2023 and is secured by substantially all of the Company's assets.

The Company believes that cash generated from operating activities and available borrowings under the credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, dividend payments, and debt service obligations for the foreseeable future. However, there can be no assurance that the business will continue to generate cash flow at or above current levels or that the Company will maintain its ability to borrow under the Credit Agreement.

The Company's current ratio (current assets to current liabilities) was 1.59-to-1 at July 16, 2022 compared to 1.46-to-1 at January 1, 2022, and its investment in working capital was $417.3 million at July 16, 2022 compared to $301.4 million at January 1, 2022. The net long-term debt to total capital ratio was 0.37-to-1 at July 16, 2022 compared to 0.34-to-1 at January 1, 2022.

Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and finance lease liabilities, plus current portion of long-term debt and finance lease liabilities, less cash and cash equivalents. The ratio of net debt to capital is a non-GAAP financial measure that is calculated by dividing net long-term debt, as defined previously, by total capital (net long-term debt plus total shareholders' equity). 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. Total net long-term debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

Following is a reconciliation of "Long-term debt and finance lease liabilities" to Net long-term debt as of July 16, 2022 and January 1, 2022.


	July 16,		January 1
(In thousands)	2022		2022
Current portion of long-term debt and finance lease liabilities	$	6,303		$	6,334
Long-term debt and finance lease liabilities		473,876			399,390
Total debt		480,179			405,724
Cash and cash equivalents		(21,217	)		(10,666	)
Net long-term debt	$	458,962		$	395,058

For information on contractual obligations, see the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022. At July 16, 2022, there have been no material changes to the Company's significant contractual obligations outside the ordinary course of business.

Cash Dividends

During the quarter ended July 16, 2022, the Company declared $7.6 million in dividends. A 5.0% increase in the quarterly dividend rate from $0.20 per share to $0.21 per share was approved by the Board of Directors and announced on March 2, 2022. Although the Company expects 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. Whether the Board of Directors continues to declare dividends depends on a number of factors, including the Company's future financial condition, anticipated profitability and cash flows and compliance with the terms of its credit facilities.

Under the senior revolving credit facility, the Company is generally permitted to pay dividends in any fiscal year up to an amount such that all cash dividends, together with any cash distributions and share repurchases, do not exceed $35.0 million. Additionally, the Company is generally permitted to pay cash dividends and repurchase shares in excess of $35.0 million in any fiscal year so long as its Excess Availability, as defined in the senior revolving credit facility, is in excess of 10% of the Total Borrowing Base, as defined in the senior revolving credit facility, before and after giving effect to the repurchases and dividends.

Off-Balance Sheet Arrangements

The Company has also made certain commercial commitments that extend beyond July 16, 2022. These commitments consist primarily of purchase commitments, standby letters of credit of $17.7 million as of July 16, 2022, and interest on long-term debt and finance lease liabilities.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Based on the Company's ongoing review, the Company makes adjustments it considers appropriate under the facts and circumstances. This discussion and analysis of the Company's financial condition and results of operations is based upon the Company's consolidated financial statements. The Company believes these accounting policies and others set forth in Item 7 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022 should be reviewed as they are integral to understanding the Company's financial condition and results of operations. The Company has discussed the development, selection and disclosure of these accounting policies with the Audit Committee of the Board of Directors. The accompanying financial statements are prepared using the same critical accounting policies discussed in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

Recently Issued Accounting Standards

Refer to Note 2 in the notes to the condensed consolidated financial statements for further information.

ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

There have been no material changes in market risk of SpartanNash from the information provided in Part II, Item 7A, "Quantitative and Qualitative Disclosure About Market Risk," of the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

ITEM 4. Controls and Procedures

An evaluation of the effectiveness of the design and operation of SpartanNash Company's disclosure controls and procedures (as currently defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) was performed as of July 16, 2022 (the "Evaluation Date"). This evaluation was performed under the supervision and with the participation of SpartanNash Company's management, including its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). As of the Evaluation Date, SpartanNash Company's management, including the CEO and CFO, concluded that SpartanNash's disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including its principal executive and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. During the second quarter of 2022 there were no changes in SpartanNash's internal control over financial reporting that materially affected, or were reasonably likely to materially affect, SpartanNash's internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the fourth quarter of 2017, the Board authorized a publicly announced $50 million share repurchase program, expiring in 2022. There were $6.6 million of common stock share repurchases made under this program during the second quarter of 2022. At July 16, 2022, $23.1 million remains available under the program. Repurchases of common stock may include: (1) shares of SpartanNash common stock delivered in satisfaction of the exercise price and/or tax withholding obligations by holders of employee stock options who exercised options, and (2) shares submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of the restricted shares. The value of the shares delivered or withheld is determined by the applicable stock compensation plan.

On February 22, 2022, the Board of Directors authorized the repurchase of common shares in connection with a new $50 million program, increasing the total availability for share repurchases to approximately $73 million. The Company plans to return value to shareholders through share repurchases under this program as well as continuing regular dividends.


			Average
	Total Number		Price Paid
Fiscal Period	of Shares Purchased		per Share
April 23 - May 21, 2022
Employee Transactions		-		$	-
Repurchase Program		-		$	-
May 22 - June 18, 2022
Employee Transactions		666		$	33.81
Repurchase Program		30,000		$	31.58
June 19 - July 16, 2022
Employee Transactions		-		$	-
Repurchase Program		185,402		$	30.34
Total for quarter ended July 16, 2022
Employee Transactions		666		$	33.81
Repurchase Program		215,402		$	30.51

ITEM 6. Exhibits

The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:


Exhibit Number		Document

3.1		Restated Articles of Incorporation of SpartanNash Company, as amended. Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended July 15, 2017. Incorporated herein by reference.

3.2		Bylaws of SpartanNash Company, as amended. Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2016. Incorporated herein by reference.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended July 16, 2022, has been formatted in Inline XBRL.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SPARTANNASH COMPANY (Registrant)
Date: August 18, 2022	By	/s/ Jason Monaco
		Jason Monaco Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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