Roundy's, Inc. Reports First Quarter 2013 Financial Results

MILWAUKEE--(BUSINESS WIRE)-- Roundy's, Inc. ("Roundy's") (NYS: RNDY) , a leading grocer in the Midwest, today reported financial results for the first quarter ended March 30, 2013.

Q1 2013

  • Net sales increased 4.8% to $983.5 million
  • Adjusted net income* was $8.6 million, or $0.19 adjusted diluted net earnings per common share*, compared to $10.6 million, or $0.28 adjusted diluted net earnings per common share* in the prior year quarter
  • Adjusted EBITDA* was $44.0 million compared to $48.7 million in the same quarter last year

"We are pleased with our ability to continue to realize improvements in both sales and volume through our focus on customer-centric initiatives, despite experiencing additional competitive openings and increased promotional activity in our core markets," said Robert Mariano, chairman, president and chief executive officer of Roundy's. "In the first quarter, we further integrated new service, product and merchandising concepts into our group of 14 test stores in the Milwaukee area. Our early improvements in key operating and financial metrics across these stores give us increased confidence to begin a roll-out to additional Milwaukee area stores over the remainder of this year."

Mr. Mariano concluded, "The expansion of Mariano's, our growth banner, continues on schedule as we recently opened our ninth and tenth stores with three more Mariano's stores planned to open in the Chicago area in 2013 for a total 13 stores by year-end."

* Adjusted Net Income, Adjusted Net Earnings per Common Share and Adjusted EBITDA are non-GAAP financial measures. See the tables herein for important information about these measures and a full reconciliation to the most comparable GAAP measure.

Financial Results for First Quarter of 2013

Net sales for the first quarter of 2013 were $983.5 million, an increase of $45.3 million, or 4.8 %, from $938.2 million for the first quarter of 2012. The increase primarily reflects the benefit of new stores and a 1.3% increase in same-store sales. Same-store sales comparisons were positively impacted by the 2013 Easter and 2013 New Year's holiday shifts, partially offset by the negative effect of competitive store openings, the shift to greater generic pharmacy sales and the challenging economic environment. Additionally, same-store sales were positively impacted by a 5.2% increase in average transaction size, partially offset by a 3.7% decrease in the number of customer transactions. Adjusted for the effect of the calendar shifts, same-store sales declined 0.8%.

Gross profit for the first quarter of 2013 increased 2.2% to $262.5 million, from $256.8 million in the same period last year. Gross profit as a percentage of net sales was 26.7% for the first quarter of 2013, compared to 27.4% in the same period last year. The decrease in gross profit as a percentage of net sales primarily reflects greater price and promotional investments in certain markets and increased shrink, partially offset by an increased perishable sales mix.

Operating and administrative expenses for the first quarter of 2013 increased to $235.8 million, from $226.1 million in the same period last year. The increase in operating and administrative expense dollars was primarily due to increased labor and occupancy costs related to new and replacement stores. Operating and administrative expenses as a percentage of net sales decreased to 24.0% in the first quarter of 2013, from 24.1% in the same period last year, due to increased fixed cost leveraging resulting from higher sales.

For the first quarter of 2013, net income was $8.6 million, or $0.19 diluted net earnings per common share, compared to reported net income of $2.3 million and adjusted net income of $10.6 million, or $0.06 diluted net earnings per common share and $0.28 adjusted diluted net earnings per common share, for the first quarter of 2012. Earnings per common share for the first quarter of 2013 is not comparable to the first quarter 2012 due to the difference in weighted average shares outstanding related to the initial public offering that was completed during the prior year period. Adjusted net income for the first quarter of 2012 excluded an $8.4 million after-tax charge, or $0.22 per diluted common share, for the early extinguishment of debt and one-time IPO expenses.

Adjusted EBITDA for the first quarter of 2013 was $44.0 million, compared to $48.7 million in the first quarter of 2012. The decrease was primarily due to the effect of the continued challenging economic and competitive environment.

Net cash flows provided by operating activities for the first quarter 2013 was $13.9 million, compared to cash used in operating activities of $6.9 million during the first quarter 2012. The increase in cash provided by operating activities was due primarily to decreased inventory levels, partially offset by timing of payments for inventory, both of which are related to the earlier timing of the Easter holiday compared to 2012, as well as higher net income.

The Company paid a dividend of $0.12 per share on all outstanding shares of its common stock during the first quarter. During the second quarter of fiscal 2013, the Company declared a quarterly cash dividend of $0.12 per share of outstanding common stock, which will be paid on May 28, 2013 to stockholders of record as of May 20, 2013.

Fiscal 2013 Guidance

The Company reiterated its guidance for fiscal 2013. The following table provides information on the Company's current estimated 2013 results:

        Sales growth         3.0% to 4.0%
 
Same-store sales growth (1.5%) to (0.5%)
 
Adjusted EBITDA $185 to $195 million
 
Adjusted EBITDA Margin 4.6% to 4.8%
 
Interest Expense (1) $47 to $50 million
 
Income Tax Rate 40% to 41%
 
Capital Expenditures $63 to $68 million
New Store Openings 5
Replacement Store Openings 1
 
Diluted Net Earnings per Share $0.88 to $1.01
   

(1)

 

Includes non-cash interest of approximately $2.4 million and $1.5 million related to amortization of deferred financing fees and original issue discount, respectively.

 

Conference Call

The Company will host a conference call and audio webcast today, May 9, 2013 at 4:30 p.m. ET (3:30 p.m. CT) to discuss financial results for the first quarter fiscal 2013. To access the conference call, participants should dial (800) 475-0509; passcode is 5832927. Participants are encouraged to dial in to the conference call ten minutes prior to the scheduled start time. The call will be also broadcast live over the Internet and accessible through the Investor Relations section of the Company's website at www.roundys.com, where it will be archived and accessible through May 23, 2013. A telephone replay will be available through May 23, 2013 by calling (800) 778-9710 to access the playback.

About Roundy's

Roundy's is a leading grocer in the Midwest with nearly $4.0 billion in sales and more than 19,000 employees. Founded in Milwaukee in 1872, Roundy's operates 160 retail grocery stores and 99 pharmacies under the Pick 'n Save, Rainbow, Copps, Metro Market and Mariano's retail banners in Wisconsin, Minnesota and Illinois.

Non-GAAP Financial Measures

This press release presents Adjusted Net Income, Adjusted Net Earnings Per Common Share and Adjusted EBITDA, which are non-GAAP financial measures within the meaning of applicable SEC rules and regulations, as defined under "Consolidated Statements of Income." For a reconciliation of Adjusted Net Income and Adjusted EBITDA to net income under generally accepted accounting principles and for a discussion of the reasons why the Company believes that these non-GAAP financial measures provide information that is useful to investors see the tables below under "Reconciliation of Non-GAAP Amounts."

Forward-Looking Statements

This release contains forward-looking statements about the Company's future performance, which are based on Management's assumptions and beliefs in light of the information currently available to it. The Company assumes no obligation to update the information contained herein. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements including, but not limited to: competitive practices and pricing in the food industry generally and particularly in the Company's principal markets; employee relationships and the terms of future collective bargaining agreements; the costs and other effects of legal and administrative cases and proceedings; the nature and extent of continued consolidation in the food industry; changes in the financial markets which may affect the cost of capital and our ability to access capital; supply or quality control problems with vendors; and changes in economic conditions which affect the buying patterns of customers. Additional factors that could cause actual results to differ materially from such statements are discussed in the Company's periodic reports and filings with the Securities and Exchange Commission.

 
Roundy's, Inc.
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
 
    Thirteen Weeks Ended
March 31, 2012     March 30, 2013
(Unaudited) (Unaudited)
 
Net Sales $ 938,245 $ 983,505
 
Costs and Expenses:
Cost of sales 681,483 721,005
Operating and administrative 226,109 235,819
Interest:
Interest expense, net 14,066 11,584
Amortization of deferred financing costs 692 573
Loss on debt extinguishment   13,304   -
  935,654   968,981
 
Income before Income Taxes 2,591 14,524
 
Provision for Income Taxes   320   5,877
 
Net Income $ 2,271 $ 8,647
 
 
 
Net earnings per common share:
Basic $ 0.06 $ 0.19
Diluted $ 0.06 $ 0.19
 
Weighted average number of common shares outstanding:
Basic 37,719 44,912
Diluted 38,596 44,951
 
Dividends declared per share $ - $ 0.12
 
Comprehensive Income $ 2,942 $ 9,306
 
 

Reconciliation of Non-GAAP Amounts

Adjusted Net Income and Adjusted Net Earnings Per Common Share

The following is a summary of the calculation of Adjusted Net Income and Adjusted Net Earnings Per Common Share for the thirteen weeks ended March 31, 2012 and March 30, 2013, respectively (in thousands):

 
    Thirteen Weeks Ended
March 31, 2012     March 30, 2013
Net Income $ 2,271 $ 8,647
Loss on debt extinguishment, net of tax 8,049 -
One-time IPO expenses, net of tax   314   -
 
Adjusted Net Income $ 10,634 $ 8,647
 
Net earnings per common share (as reported):
Basic $ 0.06 $ 0.19
Diluted $ 0.06 $ 0.19
 
Adjustments per common share, diluted:
Loss on debt extinguishment, net of tax $ 0.21 $ -
One-time IPO expenses, net of tax 0.01 -
 
Adjusted net earnings per common share:
Basic $ 0.28 $ 0.19
Diluted $ 0.28 $ 0.19
 

The Company presents Adjusted Net Income and Adjusted Net Earnings Per Common Share, non-GAAP measures, to provide investors with a view of operating performance excluding significant and non-recurring items.

Adjusted EBITDA

The following is a summary of the calculation of Adjusted EBITDA for the thirteen weeks ended March 31, 2012 and March 30, 2013, respectively (in thousands):

       
Thirteen Weeks Ended
March 31, 2012 March 30, 2013
Net Income $ 2,271 $ 8,647
Interest expense 14,066 11,584
Provision for income taxes 320 5,877
Depreciation and amortization expense 16,535 16,398
LIFO charges 750 500
Amortization of deferred financing costs 692 573
Non-cash stock compensation expense 238 389
Loss on debt extinguishment 13,304 -
One-time IPO expenses   519   -
 
Adjusted EBITDA $ 48,695 $ 43,968
 

The Company presents Adjusted EBITDA, a non-GAAP measure, to provide investors with a supplemental measure of its operating performance. The Company believes that Adjusted EBITDA is a useful performance measure and is used by the Company to facilitate a comparison of its operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting the Company's business than measures under U.S. generally accepted accounting principles (''GAAP'') can provide alone. The Company's board of directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for employees, including its senior executives.

The Company defines Adjusted EBITDA as earnings before interest expense, provision for income taxes, depreciation and amortization, LIFO charges, amortization of deferred financing costs, non-cash compensation expenses arising from the issuance of stock, costs incurred in connection with the Company's IPO (or subsequent offerings of Roundy's common stock), loss on debt extinguishment, certain non-recurring or unusual employee and pension related costs and goodwill impairment charges. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of the Company's results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, and methodologies in calculating LIFO expense that other companies have are different from the Company's, it omits these amounts to facilitate investors' ability to make these comparisons. Similarly, the Company omits depreciation and amortization because other companies may employ a greater or lesser amount of owned property, and because in the Company's experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance. The Company believes that investors, analysts and other interested parties consider Adjusted EBITDA an important measure of the Company's operating performance. Adjusted EBITDA should not be considered as an alternative to net income as a measure of the Company's performance. Other companies in the Company's industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.

Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. The limitations of Adjusted EBITDA include: (i) it does not reflect the Company's cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, the Company's working capital needs; (iii) it does not reflect income tax payments the Company may be required to make; and (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.


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Roundy's, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
       
December 29, 2012 March 30, 2013
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 72,889 $ 65,315
Notes and accounts receivable, less allowance for losses 33,118 34,530
Merchandise inventories 292,673 288,319
Prepaid expenses 9,706 14,959
Deferred income taxes   5,259     5,259  
Total current assets   413,645     408,382  
 
Property and Equipment, net 314,044 309,406
 
Other Assets:
Other assets - net 46,410 45,479
Goodwill   605,986     605,986  
Total other assets   652,396     651,465  
 
Total assets $ 1,380,085   $ 1,369,253  
 
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 240,392 $ 225,509
Accrued wages and benefits 39,540 36,616
Other accrued expenses 40,594 43,302
Current maturities of long-term debt and capital lease obligations 10,918 11,025
Income taxes   2,292     8,262  
Total current liabilities   333,736     324,714  
 
Long-term Debt and Capital Lease Obligations 685,644 681,221
Deferred Income Taxes 59,112 59,350
Other Liabilities   108,327     106,772  
Total liabilities   1,186,819     1,172,057  
 
Commitments and Contingencies
 
Shareholders' Equity:
Preferred stock (5,000 shares authorized at 12/29/12 and 3/30/13, respectively,
$0.01 par value, 0 shares at 12/29/12 and 3/30/13, respectively, issued and outstanding) - -
Common stock (150,000 shares authorized, $0.01 par value, 45,654 shares

and 45,598 shares at 12/29/12 and 3/30/13, respectively, issued and outstanding)

457 456
Additional paid-in capital 114,120 114,509
Retained earnings 125,649 128,532
Accumulated other comprehensive loss  
TWX +0.58 78.77

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