EX-99 3 spsform8kex991020402.htm EXHIBIT 99.1 Spartan Stores, Inc. Exhibit 99.1 to Form 8-K 02-04-02

Exhibit 99.1





For Immediate Release

Investor Contact: Dave Staples
Executive Vice President & CFO
(616) 878-8319

Media Contact: Jeanne Norcross
Director Corporate Communications
(616) 878-2830

Spartan Stores Reports Fiscal 2002 Third-Quarter Financial Results

GRAND RAPIDS, MICHIGAN--February 4, 2002--Spartan Stores, Inc., (Nasdaq: SPTN) today reported financial results for its fiscal 2002 third quarter, which ended January 5, 2002.

Sales for the fiscal 2002 third quarter decreased 6.4 percent to $1.06 billion from $1.14 billion in last year's third quarter. Same-store sales for the retail grocery segment were 5.2 percent lower for the quarter. Operating margin declined to 0.7 percent from 1.8 percent in the prior-year period due principally to a decrease in the Company's Ohio market retail-store sales. Fiscal 2002's third-quarter pretax earnings from continuing operations included a $0.7 million provision for bad debt related to Kmart Corporation's filing of Chapter 11. Net earnings from continuing operations for the quarter were at break-even compared with net earnings of $7.0 million, or $0.36 per diluted share, last year.






"Clearly we are very disappointed with the third-quarter financial results," said Spartan's Chairman, President, and Chief Executive Officer, James B. Meyer. "The competitive environment in our Ohio market has been challenging, but we are firmly committed to improving our store performance and are treating it with utmost priority. We are resolute in our commitment to a value strategy and delivering top-quality products and services to our customers. Our desire is to create and maintain a pleasant shopping experience at all of our stores and we are improving the physical facilities where needed, to levels comparable with the best stores in our Ohio market."

Through the first 40 weeks of the fiscal year, sales increased 3.6 percent to $2.74 billion from $2.64 billion, and net income from continuing operations decreased to $15.1 million from $19.7 million last year. Gross margin increased to 17.2 percent from last year's 15.2 percent, and operating margin declined to 1.4 percent from 1.9 percent. Fiscal 2002's 40-week period includes net other gains of $2.3 million compared with last year's $2.4 million. This year's other gains include $1.5 million in net real estate gains and a $0.8 million gain from the sale of stock in a service provider. Last year's 40-week period included other gains of $3.5 million in net real estate gains and a $1.1 million loss on a software write off.

At January 5, 2002, shareholders' equity increased 8.0 percent to $235.9 million and the total long-term debt-to-capital ratio decreased to 59.3 percent from 61.2 percent at the end of fiscal 2001.

"As previously announced, we have taken immediate action to improve the performance of our Ohio stores. Those actions include implementation of an automated labor-scheduling program to ensure staffing levels that improve service, further improving our in-stock performance standards, and rapidly employing best-store merchandising and other practices from our top-performing stores. These steps will become more visible at the store level through better customer service, a mix of merchandise that better reflects





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local consumer preferences at an appealing value and improved product availability," Mr. Meyer said.

"These actions along with broader company initiatives focused on improving our distribution network efficiency, category management practices, and reducing corporate overhead costs are expected to improve our annualized net earnings between $5 and $10 million. We are in the beginning stages of many initiatives that will help drive and sustain future sales and earnings growth.

"We are also pleased to announce the election of Mr. Ken Stevens to our board of directors. Mr. Stevens was recently named Chief Operating Officer of Intimate Brands retail operation, The Bath and Body Works, and served as Chairman and Chief Executive Officer of Bank One Retail Group, President and Chief Operating Officer of the Taco Bell Division of PepsiCo, and a partner at McKinsey & Company. We are delighted to have Mr. Stevens join our board and believe that our Company will benefit greatly from his retail industry acumen and insight. His election provides additional strength to our board's retail expertise."

A telephone conference call to discuss the company's third-quarter financial results is scheduled for 9:00 a.m. eastern tomorrow, Tuesday, February 5, 2002. A live webcast of this conference call will be available on the company's website, www.spartanstores.com. Simply click on "Investor Information" and follow the links to the live webcast. The webcast will remain available for replay on the company's website for approximately ten days.

Spartan Stores, Inc., (Nasdaq:SPTN) Grand Rapids, Michigan, owns and operates 102 supermarkets and 25 deep-discount drug stores in Michigan and Ohio, including Ashcraft's Markets, Family Fare Supermarkets, Food Town, Glen's Markets, Great Day Food Centers, Prevo's Family Markets and The Pharm. The Company also distributes






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more than 40,000 private-label and national brand products to more than 350 independent grocery stores and serves as a wholesale distributor to 6,600 convenience stores.

This press release contains forward-looking statements that involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such a difference include, but are not limited to, competitive pressures among food retail and distribution companies, changes in the interest rate environment and general economic and market conditions, difficulties assimilating and integrating acquisitions, difficulties in retail operations, labor shortages or stoppages, and other factors described in the Spartan Stores' Annual Report on Form 10-K and other filings with the SEC. Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements.















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SPARTAN STORES, INC., AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

   

Third Quarter (16 weeks) ended
(unaudited)

 

Year-to-Date (40 weeks) ended
(unaudited)

         
   

January 5,
2002


 

December 30,
2000


 

January 5,
2002


 

December 30,
2000



Net sales

$

1,062,758

$

1,135,844

$

2,736,390

$

2,640,307

 

Cost of sales

 

885,892


 

947,304


 

2,265,021


 

2,238,066


 

Gross profit

 

176,866

 

188,540

 

471,369

 

402,241

 
                   

Operating expenses

                 

     Selling, general and administrative

 

156,418

 

155,832

 

396,560

 

324,187

 

     Depreciation and amortization

 

13,506


 

12,389


 

35,229


 

27,694


 

Total operating expenses

 

169,924

 

168,221

 

431,789

 

351,881

 
                   

Operating income

 

6,942

 

20,319

 

39,580

 

50,360

 
                   

Non-operating expense (income)

                 

     Interest expense

 

8,442

 

9,681

 

21,035

 

23,626

 

     Interest income

 

(722

)

(1,912

)

(1,874

)

(3,412

)

     Other (gains) and losses

 

(810


)

854


 

(2,330


)

(2,361


)

Total non-operating expense, net

 

6,910


 

8,623


 

16,831


 

17,853


 
                   

Earnings before income taxes and discontinued
     operations

 


32

 


11,696

 


22,749

 


32,507

 

Income taxes

 

12


 

4,667


 

7,650


 

12,789


 
                   

Earnings from continuing operations

 

20

 

7,029

 

15,099

 

19,718

 
                   

(Loss) earnings from discontinued insurance
     segment

 


34


 


274


 


(226



)


325


 

Net earnings

$

54


$

7,303


$

14,873


$

20,043


 
                   

Basic earnings per share:

                 

     Earnings from continuing operations

$

0.00

$

0.36

$

0.77

$

1.18

 

     (Loss) earnings from discontinued operations

 

0.00


 

0.01


 

(0.01


)

0.02


 

     Net earnings

 

0.00


 

0.37


 

0.76


 

1.20


 
                   

Diluted earnings per share:

                 

     Earnings from continuing operations

$

0.00

$

0.36

$

0.76

$

1.18

 

     (Loss) earnings from discontinued operations

 

0.00


 

0.01


 

(0.01


)

0.02


 

     Net earnings

$

0.00


$

0.37


$

0.75


$

1.20


 
                   

Weighted average number of shares outstanding:

                 

     Basic

 

19,758

 

19,498

 

19,483

 

16,677

 

     Diluted

 

20,009

 

19,498

 

19,748

 

16,678

 




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SPARTAN STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

   

January 5,
2002

   

March 31,
2001

 

ASSETS

           

Current assets

           

     Cash and cash equivalents

$

12,622

 

$

21,577

 

     Marketable securities

 

10,392

   

21,978

 

     Accounts receivable, net

 

96,142

   

87,565

 

     Inventories

 

208,655

   

179,589

 

     Other current assets

 

10,907


   

12,970


 

          Total current assets

 

338,718

   

323,679

 
             

Other assets

           

     Goodwill, net

 

156,756

   

155,737

 

     Other

 

30,110


   

36,139


 
             

          Total other assets

 

186,866

   

191,876

 
             

Property and equipment, net

 

271,545

   

285,988

 
             

Total assets

$

797,129


 

$

801,543


 

LIABILITIES AND SHAREHOLDERS' EQUITY

           
             

Current liabilities

           

     Accounts payable

$

107,753

 

$

116,105

 

     Accrued payroll and benefits

 

29,347

   

37,158

 

     Insurance reserves

 

16,833

   

20,602

 

     Other accrued expenses

 

30,808

   

31,715

 

     Current maturities of long-term debt

 

33,704


   

38,478


 

          Total current liabilities

 

218,445

   

244,058

 
             

Deferred taxes on income

 

10,545

   

13,840

 
             

Other long-term liabilities

 

21,815

   

18,600

 
             

Long-term debt

 

310,445

   

306,632

 
             

Shareholders' equity

           

     Common stock, voting, no par value, authorized 50,000
          shares, outstanding 19,763 shares and 19,262

 


115,700

   


109,868

 

     Preferred stock, non-voting, no par value; 10,000 authorized;
          no shares issued or outstanding

 


0

   


0

 

     Accumulated other comprehensive income

 

(3,239

)

 

0

 

     Retained earnings

 

123,418


   

108,545


 
             

          Total shareholders' equity

 

235,879


   

218,413


 
             

Total liabilities and shareholders' equity

$

797,129


 

$

801,543


 


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