SpartanNash Reaffirms Significant Operational Success, Strong Financial Results and Enhanced Board and Leadership Team as Winning Recipe for Shareholders
SpartanNash has filed definitive proxy materials with the SEC regarding its Annual Meeting on June 9, 2022. The company emphasizes its successful transformation, reporting a total shareholder return of 251% since the management team's transition in mid-2019 and an 88% increase since CEO Tony Sarsam's appointment in September 2020. The letter urges shareholders to vote for its nine qualified director nominees on the WHITE proxy card, arguing that the Investor Group's short-term agenda may jeopardize the company's long-term value.
- Total shareholder return of 251% since mid-2019.
- 88% increase in total shareholder return since September 2020.
- Increased revenue from $8.5B in 2019 to $8.9B in 2021 (+4.6%).
- Adjusted EBITDA rose from $177.9M in 2019 to $213.7M in 2021 (+20.1%).
- Adjusted Net EPS increased from $1.10 in 2019 to $1.70 in 2021 (+54.5%).
- Successful board refreshment with diverse and experienced nominees.
- Investor Group's agenda may reduce board diversity.
- Proxy contest could distract from the ongoing transformation.
- Investor Group has a short-term focus that may undermine long-term progress.
Files Definitive Proxy Materials and Mails Letter to Shareholders
Urges Shareholders to Vote “FOR” each of SpartanNash’s Highly Qualified Director Nominees on the WHITE Proxy Card
Launches SpartanNashTransformation.com, Providing Additional Information for Shareholders
Underscores Macellum and Ancora’s Short-Term Focus and Predetermined Agenda
In conjunction with the filing of the definitive proxy statement,
Highlights from the letter include:
-
SpartanNash’s transformation is delivering positive results and driving shareholder value: SpartanNash’s financial results make it clear that the Company’s transformation is well underway and that its strategy is working. Over the past two years, the Company has generated increased revenue and adjusted EBITDA, effectively allocated capital to the business and to shareholders, and significantly de-levered its balance sheet. SpartanNash’s total shareholder return has been
251% since the Board transitioned the management team in the summer of 20191 and88% sinceSeptember 2020 whenTony Sarsam was announced as CEO2. The Company has also significantly outperformed the S&P 500 over those same time periods.
-
Significant Board changes have already been made:
SpartanNash has a talented, diverse and engaged Board with the expertise and skills required to successfully guide the Company forward. The Company appointed three new directors inFebruary 2022 as part of a deliberate and thorough refreshment process that began in the summer of 2021. The directors were recruited and vetted with the assistance of a leading executive search firm that took into consideration feedback from shareholders. In connection with this refreshment, three current directors will not stand for reelection at the Company’s 2022 Annual Meeting of Shareholders.
- SpartanNash’s director nominees are superior to Macellum and Ancora’s (the “Investor Group”) candidates and are best suited to advance the Company’s transformation: The Board is confident that the skillsets of the Company’s nominees outmatch the Investor Group’s slate in every critical area. Collectively, SpartanNash’s directors possess extensive public company board leadership and operating experience, as well as financial and industry expertise spanning food distribution, retail and consumer goods. The Board also brings skills across strategy, business and culture transformation, supply chain and technology, and other areas that are directly relevant to SpartanNash’s business and reflective of shareholder input. The Investor Group’s nominees, if elected, would reduce the Board’s diversity with directors who are not additive.
-
The Investor Group has only one playbook and a short-term focused, predetermined agenda:The Investor Group is attempting to apply the same cookie-cutter approach atSpartanNash that it has attempted to use at multiple apparel, discount and department store retailers, demonstrating, at best, a lack of understanding of the Company’s vastly different business model as a distribution and food retail company, and at worst, a blatant disregard of how SpartanNash’s business operates. Further, the Investor Group’s attacks focus on prior performance under a different management team and are rooted in information over four years old. Rather than offering any ideas or suggestions that would improve operations, theInvestor Group shows a short-term focus on financial engineering that ignores the significant progressSpartanNash has made in its transformation and the strong financial performance the Company has demonstrated over the last two years since the new leadership team has been in place. The Board believes the Investor Group’s nominees would implement a short-term focused, predetermined agenda and distract the Company from its current path. WhileSpartanNash remains open-minded and receptive to constructive ideas, from any source, that will drive shareholder value, the Board believes it is not in our shareholders’ best interest to allow the Investor Group’s recycled agenda into the Company’s boardroom.
-
SpartanNash has attempted to reach a constructive resolution with Macellum and avoid a costly proxy contest:SpartanNash has engaged extensively with Macellum sinceNovember 2021 and attempted to reach a constructive resolution that would avoid a costly proxy contest, which is not in the best interest of shareholders as it distracts the Company’s Board and Management from its main focus of creating long-term shareholder value. As part of our constructive efforts,SpartanNash offered to appoint one of Macellum’s candidates with grocery retail and distribution experience despite the Board and management team already having significant experience in these same areas. In addition, the Company proposed forming a transformation committee of the Board to review aspects of the business, including strategic matters, which would have included Macellum’s director designee. However, Macellum rejected this offer outright and refused to allowSpartanNash to interview any of its director nominees, further demonstrating that Macellum has had a self-serving, predetermined agenda all along and not a genuine desire to do what is best for all shareholders.
SpartanNash’s definitive proxy materials and other materials regarding the Board of Directors’ recommendation for the 2022 Annual Meeting can be found at SpartanNashTransformation.com.
The full text of the letter being mailed to shareholders follows:
Vote the Enclosed White Proxy Card Today
“FOR” All of SpartanNash’s Highly Qualified Directors
Dear Fellow Shareholder,
The SpartanNash Board of Directors and management team are committed to moving the Company forward with a clear priority – driving long-term, sustainable value creation for shareholders.
Your Board has taken decisive action to implement a comprehensive transformation of the Company, refresh your Board’s composition and make significant executive leadership upgrades to drive improved financial performance.
The results speak for themselves. Since your Board transitioned the senior management team in the summer of 2019, the Company has increased revenue and adjusted EBITDA, effectively allocated capital to the business and to shareholders while significantly reducing debt. Simply put, we have built a more valuable company that is better positioned to meet the demands of a highly competitive and constantly evolving industry.
Against this backdrop, you will face an important decision regarding the future of your investment at our upcoming Annual Meeting of Shareholders, scheduled for
As you may know, two activist investors,
We urge you to vote the WHITE proxy card “FOR” each of the
SpartanNash’s Board and Management Team Have Taken Proactive Actions to Deliver Long-Term Value Creation, and the Company is Demonstrating Strong Results
In recent years, your Board has overseen a comprehensive transformation of
As a result, today,
The
In 2020, your Board recruited President and CEO
The management team’s focus on driving change through the Company’s transformation, operating model and culture is enhancing profitable growth and enabling
The foundation of our strategy is creating a People First culture. In addition to upgrading and strengthening SpartanNash’s senior management team over the past year, the Company has also implemented front-line pay increases and improved benefits to attract and retain talent in a highly competitive and challenging labor market. We provided an average of over
Our focus on Operational Excellence and Insights that Drive Solutions is about elevating execution, transforming our supply chain, optimizing our customer product portfolios, and launching customer-centric, innovative solutions.
We are implementing initiatives to improve customer profitability and expand services in both our food distribution and military businesses. This includes continuing to expand and optimize relationships with key customers such as Amazon and Dollar General, which not only provide critical scale to support SpartanNash’s operations but also create a strong platform for our business to grow. In our retail business, we are tailoring our assortment to align with local community preferences and enhancing our upmarket retail experience. Our teams are also leveraging data-driven insights as we invest in our OwnBrands private label and work to increase e-commerce sales. Across the Company’s operations, we are increasing automation and applying technology solutions that enable our teams to focus on higher value-add activities and drive efficiencies.
Our ongoing supply chain transformation alone is expected to drive annualized cost savings of
Ultimately, our strategic priorities are designed to deliver continuing improvements in revenue and operating margin performance – and we are already seeing progress in our efforts.
Our 2021 financial results compared to our pre-pandemic 2019 financial results demonstrate that our strategy is working.
|
Fiscal 2019 |
Fiscal 2021 |
Change |
Consolidated |
|
|
+ |
Adjusted Earnings from Continuing Operations |
|
|
+ |
Adjusted Net EPS |
|
|
+ |
Adjusted EBITDA |
|
|
+ |
SpartanNash’s Recently Refreshed Board is Best Positioned to Advance
the Company’s Transformation and the Company’s Directors are Superior
to the Investor Group’s Slate
The SpartanNash Board is composed of directors who are exceptionally qualified, independent, diverse and committed to acting in the best interests of all
Following the 2022 Annual Meeting, if all of your Board’s nominees are elected, your Board will be composed of nine highly qualified directors, eight of whom are independent, including an independent Board Chair. In addition, with diversity as a priority at
In particular,
After your Board determined to make executive leadership upgrades,
Conducted with the assistance of a leading executive search firm, this Board refreshment process resulted in the appointment of
Each of these new directors brings skills and expertise critical to SpartanNash’s continued transformation, including the replacement of skills being lost through director retirements.
Your Board works closely with the new leadership team and is committed to acting as a significant agent of change to help drive SpartanNash’s ongoing transformation. We are confident that the experience and skillsets of SpartanNash’s directors are superior to those of the Investor Group’s director nominees in every critical area.
Do not undermine the value of your investment. The Investor Group’s nominees, if elected, would reduce your Board’s diversity and would not be additive to your Board. Further, we believe the Investor Group’s nominees, if elected, would distract the Company from its current path, which is clearly producing demonstrable results and outsized shareholder returns.
The Investor Group Has Only One Playbook that is Short-Term Focused
and Would Undermine the Value Creation Potential of the Company’s Transformation
While your Board and management team have been transforming
Further, the
After doing little to understand SpartanNash’s multi-faceted business, the
While
SpartanNash Has Sought Constructive Engagement;
The Investor Group’s Priority Appears to Be a Proxy Contest
Since Macellum first approached the Company in
In stark contrast, after only its second meeting with management, Macellum surprisingly nominated a control slate of five director candidates, including two of its own principals. At that point, Macellum admitted to
As your Board and management team continued to engage with Macellum, its principals never mentioned the firm’s association with Ancora, and Ancora made no attempt to contact the Company as a shareholder until the
Other than proposing a control slate of directors, Macellum did not present any substantive views on the Company or propose any specific ideas for consideration by your Board and management until a meeting in
Only two days later, Macellum followed up with unreasonable demands, which included the prompt appointment of four of its five nominees to your Board, an agreement to review strategic alternatives, the formation of a committee to oversee the exploration of strategic alternatives that it insisted be led by Macellum’s director designees, and a firm commitment to proceed with a sale-leaseback of a significant portion of the Company’s owned real estate – an irresponsible demand given Macellum had no informed details about the Company’s real estate or operations.
Notwithstanding the Investor Group’s apparent short-term focus and predetermined agenda,
- Despite your Board and management team already having strong grocery retail and distribution experience, the Company agreed to interview two of Macellum's candidates who have grocery retailing backgrounds for purposes of appointing one mutually agreeable candidate with this expertise.
- Macellum expressed strong dissatisfaction with this proposal – even refusing to allow the Company to interview its candidates – and did not offer an alternative suggestion or request.
- The Company then followed up with Macellum to propose, subject to full Board approval, to appoint one of Macellum's candidates with grocery retail and distribution experience and to form a transformation committee of your Board to review certain aspects of the business, including strategic matters, which would include Macellum's director designee.
- Macellum rejected the offer outright.
Your Board has been open-minded and responsive to shareholder input and has attempted to find a constructive resolution. Do not be misled by the Investor Group’s recasting of its interactions with the Company.
Protect the Value of
Vote the WHITE Proxy Card Today
With a refreshed Board, new leadership making significant progress in executing a transformation strategy and financial results that validate our strategic priorities,
The Investor Group’s proposed changes to your Board would derail continued progress and risk the long-term potential of your investment. We encourage you not to vote using any Blue proxy card you may receive from the
The SpartanNash Board has been unwavering in its commitment to act in the best interest of all shareholders. We look forward to continuing our engagement with you as we work to deliver enhanced shareholder value in the years ahead.
Thank you for your continued support.
Sincerely,
SpartanNash Board of Directors
YOUR VOTE IS IMPORTANT!
Simply follow the easy instructions on the enclosed WHITE proxy card to vote by telephone, by internet or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided. If you received this letter by email, you may also vote electronically by following the detailed instructions provided by your bank or broker. Please simply disregard any Blue proxy card you may receive from the
If you have questions about how to vote your shares, please call the firm assisting us with the solicitation of proxies,
Shareholders Call Toll Free: (800) 662-5200
Banks, Brokers, Trustees and Other Nominees Call Collect: (203) 658-9400
Email: |
Advisors
About
Forward-Looking Statements
The matters discussed in this press release include "forward-looking statements" about the plans, strategies, objectives, goals or expectations of 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” or “trend” 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, 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; disruptions associated with the COVID-19 pandemic; the Company's ability to manage its private brand program for
Important Additional Information and Where to Find It
The Company has filed a definitive proxy statement on Schedule 14A, an accompanying WHITE proxy card and other relevant documents with the
Non-GAAP Financial Measures
This letter includes information regarding adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") and adjusted earnings from continuing operations. 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.
Adjusted EBITDA and adjusted earnings from continuing operations for fiscal 2021 excludes, among other items, organizational realignment, severance associated with cost reduction initiatives and the transition impact of a new paid time off plan. Organizational realignment includes benefits for associates terminated as part of a leadership transition plan which do not meet the definition of a reduction-in-force. Adjusted EBITDA and adjusted earnings from continuing operations for fiscal year 2020 excludes, among other items, “Fresh Cut operating losses” subsequent to the decision to exit these operations, severance associated with cost reduction initiatives, organizational alignment costs, and fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Adjusted earnings from continuing operations for fiscal year 2020 exclude pension termination income related to refunds from the annuity provider associated with the final reconciliation of participant data, as well as net tax benefits associated with the CARES Act. Adjusted EBITDA and adjusted earnings from continuing operations for fiscal year 2019 excludes, among other items, “Fresh Kitchen operating losses” subsequent to the decision to exit these operations at the beginning of the third quarter, costs associated with organizational realignment, which include significant changes to the Company's management team, and fees paid to a third-party advisory firm associated with Project One Team, the Company's initiative to drive growth while increasing efficiency and reducing costs. Pension termination costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations for fiscal year 2019. Each of these items are considered “non-operational” or “non-core” in nature. These measures were adjusted for the impact of the 53rd week in 2020 to provide better comparability to 2021 and 2019.
Table 1: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) (A Non-GAAP Financial Measure) (Unaudited) |
||||||
(In thousands) |
|
2021 (52 Weeks) |
|
2020 (53 Weeks) |
|
2019 (52 Weeks) |
Net earnings |
$ |
73,751 |
|
75,914 |
|
5,742 |
Loss from discontinued operations, net of tax |
|
— |
|
— |
|
175 |
Income tax expense (benefit) |
|
24,906 |
|
9,450 |
|
(2,342) |
Other expenses, net |
|
13,543 |
|
17,042 |
|
53,367 |
Operating earnings |
112,200 |
|
102,406 |
|
56,942 |
|
Adjustments: |
|
|
|
|
|
|
LIFO expense |
|
18,652 |
|
2,176 |
|
5,892 |
Depreciation and amortization |
|
92,711 |
|
89,504 |
|
87,866 |
Acquisition and integration |
|
708 |
|
421 |
|
1,437 |
Restructuring and asset impairment, net |
|
2,886 |
|
24,398 |
|
13,050 |
Cloud computing amortization |
|
2,140 |
|
297 |
|
— |
Costs associated with Project One Team |
|
— |
|
493 |
|
5,428 |
Organizational realignment, net |
|
589 |
|
455 |
|
1,812 |
Severance associated with cost reduction initiatives |
|
423 |
|
5,154 |
|
— |
Stock-based compensation |
|
6,975 |
|
6,265 |
|
7,313 |
Stock warrant |
|
1,958 |
|
6,549 |
|
— |
Non-cash rent |
|
(4,059) |
|
(4,733) |
|
(5,622) |
Fresh Cut operating losses |
|
— |
|
2,262 |
|
— |
(Gain) loss on disposal of assets |
|
(106) |
|
3,330 |
|
— |
|
|
— |
|
— |
|
2,894 |
Expenses associated with tax planning strategies |
|
— |
|
82 |
|
— |
Paid time off transition adjustment |
|
(21,371) |
|
— |
|
— |
Other non-cash charges |
|
— |
|
— |
|
933 |
Adjusted EBITDA |
|
213,706 |
|
239,059 |
|
177,945 |
53rd week |
|
— |
|
(4,246) |
|
— |
Adjusted EBITDA, excluding 53rd week |
$ |
213,706 |
$ |
234,813 |
$ |
177,945 |
Notes: 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.
Adjusted EBITDA is not a measure of performance under accounting principles generally accepted in
Table 2: Reconciliation of Earnings from Continuing Operations to Adjusted Earnings from Continuing Operations (Unaudited) |
|||||||||
|
2021 (52 Weeks) |
|
2020 (53 Weeks) |
|
2019 (52 Weeks) |
||||
(In thousands, except per share data) |
|
Earnings |
per diluted share |
|
Earnings |
per diluted share |
|
Earnings |
per diluted share |
Earnings from continuing operations |
$ |
73,751 |
2.05 |
|
75,914 |
2.12 |
|
5,917 |
0.16 |
Adjustments: |
|
|
|
|
|
|
|
|
|
Acquisition and integration |
|
708 |
|
|
421 |
|
|
1,437 |
|
Restructuring and asset impairment, net |
|
2,886 |
|
|
24,398 |
|
|
13,050 |
|
Costs associated with Project One Team |
|
— |
|
|
493 |
|
|
5,428 |
|
Organizational realignment, net |
|
589 |
|
|
455 |
|
|
1,812 |
|
Severance associated with cost reduction initiatives |
|
423 |
|
|
5,154 |
|
|
509 |
|
Fresh Cut operating losses |
|
— |
|
|
2,262 |
|
|
— |
|
|
|
— |
|
|
— |
|
|
2,894 |
|
Expenses associated with tax planning |
|
— |
|
|
82 |
|
|
— |
|
Paid time off transition adjustment |
|
(21,371) |
|
|
— |
|
|
— |
|
Loss on debt extinguishment |
|
— |
|
|
— |
|
|
329 |
|
Pension termination |
|
— |
|
|
(1,193) |
|
|
19,557 |
|
Total adjustments |
|
(16,765) |
|
|
32,072 |
|
|
45,016 |
|
Income tax effect on adjustments (a) |
|
4,056 |
|
|
(7,851) |
|
|
(11,022) |
|
Impact of CARES Act (b) |
|
— |
|
|
(9,292) |
|
|
— |
|
Total adjustments, net of taxes |
|
(12,709) |
(0.35) |
|
14,929 |
0.41 |
|
33,994 |
0.94 |
Adjusted earnings from continuing operations |
|
61,042 |
1.70 |
|
90,843 |
2.53 |
|
39,911 |
1.10 |
53rd week |
|
— |
— |
|
(2,999) |
(0.08) |
|
— |
— |
Adjusted earnings from continuing operations, excluding 53rd week |
$ |
61,042 |
1.70 |
$ |
87,844 |
2.45 |
$ |
39,911 |
1.10 |
(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.
(b) Represents tax impacts attributable to the Coronavirus Aid, Relief and Economic Security ("CARES") Act, and related tax planning, primarily related to additional deductions and the utilization of net operating loss carrybacks.
Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
Adjusted earnings from continuing operations is not a measure of performance under 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 definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.
1 Source: FactSet as of
2 Source: FactSet as of
i Source: FactSet as of
ii Source: FactSet as of
View source version on businesswire.com: https://www.businesswire.com/news/home/20220418005242/en/
Investor:
Head of Investor Relations
kayleigh.campbell@spartannash.com
SpartanNashIR@icrinc.com
616-878-8354
Shareholders:
Morrow Sodali
800-662-5200
Media:
Senior Vice President, Communications
Adrienne.Chance@spartannash.com
press@spartannash.com
212-355-4449
Source:
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