EX-99.1 3 sptnex991_021004.htm Spartan Stores, Inc. Ex. 99.1 to Form 8-K 02-10-04

EXHIBIT 99.1

SPARTAN STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS
OF OPERATIONS

The unaudited pro forma condensed consolidated balance sheet and statement of operations as of and for the year ended March 29, 2003 ("fiscal 2003") and the condensed consolidated balance sheet and statement of operations as of and for the three quarters ended January 3, 2004 have been derived from the historical financial statements of Spartan Stores, Inc. and subsidiaries ("Spartan Stores") to give effect to the sale of the receivables, inventory, real property, equipment and other assets of United Wholesale Grocery Company ("United") and the application of the net proceeds to payment of debt.

The operations of United were included in continuing operations as of and for the year ended March 29, 2003 and in discontinued operations as of and for the three quarters ended January 3, 2004. The unaudited pro forma condensed consolidated balance sheets as of March 29, 2003 and January 3, 2004 give effect to the transaction as if the transaction had occurred on those respective dates. The unaudited pro forma condensed consolidated statement of operations for the year ended March 29, 2003 reflects adjustments as if the transaction had taken place on the first day of fiscal 2003. The unaudited pro forma condensed consolidated statement of operations for the three quarters ended January 3, 2004 reflects adjustments as if the transaction had taken place on the first day of the year ending March 27, 2004 ("fiscal 2004").

Certain pro forma adjustments described in the accompanying notes are based on estimates and various assumptions that Spartan Stores believes are reasonable under the circumstances.

The unaudited pro forma condensed consolidated balance sheets and statements of operations should be read in conjunction with the Spartan Stores financial statements, including the notes thereto, as of and for the year ended March 29, 2003 and the three quarters ended January 3, 2004, and the related Management's Discussion & Analysis of Financial Condition and Results of Operations, contained in its Annual Report on Form 10-K for the year ended March 29, 2003 and its Quarterly Report on Form 10-Q for the quarter ended January 3, 2004.


















SPARTAN STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 29, 2003
(In thousands)


Assets


As Reported

 

Pro Forma
Adjustments

 

 


Pro Forma

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

     Cash and cash equivalents

$

23,306

 

$

-

 

(b) (c) (d)

$

23,306

 

     Marketable securities

 

1,705

 

 

-

 

 

 

1,705

 

     Accounts receivable, net

 

70,747

 

 

(1,553

)

(b)

 

69,194

 

     Inventories

 

138,095

 

 

(2,577

)

(b)

 

135,518

 

     Prepaid expenses and other current assets

 

13,141

 

 

(9

)

(b)

 

13,132

 

     Refundable income taxes

 

9,349

 

 

-

 

 

 

9,349

 

     Deferred taxes on income

 

4,113

 

 

-

 

 

 

4,113

 

     Property and equipment held for sale

 

54,684

 

 

-

 

 

 

54,684

 

     Total current assets

 

315,140

 

 

(4,139

)

 

 

311,001

 

 

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

 

 

 

     Goodwill, net

 

68,743

 

 

-

 

 

 

68,743

 

     Deferred taxes on income

 

25,566

 

 

(2,311

)

(b) (c)

 

23,255

 

     Other, net

 

26,785

 

 

(1

)

(b)

 

26,784

 

     Total other assets

 

121,094

 

 

(2,312

)

 

 

118,782

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

120,072

 

 

(2,829

)

(b)

 

117,243

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

556,306

 

$

(9,280

)

 

$

547,026

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

     Accounts payable

$

112,181

 

$

-

 

 

$

112,181

 

     Accrued payroll and benefits

 

28,533

 

 

-

 

 

 

28,533

 

     Insurance reserves

 

14,783

 

 

-

 

 

 

14,783

 

     Accrued taxes

 

16,735

 

 

1,752

 

(b)

 

18,487

 

     Other accrued expenses

 

17,807

 

 

645

 

(c)

 

18,452

 

     Current maturities of long-term debt

 

36,594

 

 

(1,257

)

(d)

 

35,337

 

     Total current liabilities

 

226,633

 

 

1,140

 

 

 

227,773

 

 

 

 

 

 

 

 

 

 

 

 

Other long-term liabilities

 

20,202

 

 

-

 

 

 

20,202

 

Postretirement benefits

 

16,022

 

 

-

 

 

 

16,022

 

Long-term debt

 

183,817

 

 

(14,712

)

(d)

 

169,105

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

     Common stock, voting, no par value; 50,000 shares
       authorized; 19,999 shares outstanding

 


116,388

 

 


-

 

 

 


116,388

 

     Preferred stock, no par value, 10,000
       shares authorized; no shares outstanding

 


-

 

 


-

 

 

 


-

 

     Accumulated other comprehensive loss

 

(2,816

)

 

-

 

 

 

(2,816

)

     (Accumulated deficit) retained earnings

 

(3,940

)

 

4,292

 

(b) (c)

 

352

 

     Total shareholders' equity

 

109,632

 

 

4,292

 

 

 

113,924

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

556,306

 

$

(9,280

)

 

$

547,026

 

See notes to unaudited pro forma condensed consolidated balance sheets and statements of operations.



2

SPARTAN STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JANUARY 3, 2004
(In thousands)


Assets


As Reported

 

Pro Forma
Adjustments

 

 


Pro Forma

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

     Cash and cash equivalents

$

19,083

 

$

-

 

(b) (c) (d)

$

19,083

 

     Marketable securities

 

1,656

 

 

-

 

 

 

1,656

 

     Accounts receivable, net

 

46,900

 

 

(1,578

)

(b)

 

45,322

 

     Inventories

 

101,917

 

 

(2,275

)

(b)

 

99,642

 

     Prepaid expenses and other current assets

 

9,372

 

 

(122

)

(b)

 

9,250

 

     Deferred taxes on income

 

6,544

 

 

-

 

 

 

6,544

 

     Property and equipment held for sale

 

6,797

 

 

(2,690

)

(b)

 

4,107

 

     Total current assets

 

192,269

 

 

(6,665

)

 

 

185,604

 

 

 

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

 

 

 

     Goodwill, net

 

68,700

 

 

-

 

 

 

68,700

 

     Deferred taxes on income

 

27,196

 

 

(2,311

)

(b) (c)

 

24,885

 

     Other, net

 

17,696

 

 

(1

)

(b)

 

17,695

 

     Total other assets

 

113,592

 

 

(2,312

)

 

 

111,280

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

109,946

 

 

-

 

 

 

109,946

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

415,807

 

$

(8,977

)

 

$

406,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

     Accounts payable

$

80,777

 

$

-

 

 

$

80,777

 

     Accrued payroll and benefits

 

21,870

 

 

-

 

 

 

21,870

 

     Insurance reserves

 

14,625

 

 

-

 

 

 

14,625

 

     Accrued taxes

 

9,918

 

 

1,865

 

(b)

 

11,783

 

     Other accrued expenses

 

11,944

 

 

570

 

(c)

 

12,514

 

     Current maturities of long-term debt

 

4,238

 

 

-

 

 

 

4,238

 

     Total current liabilities

 

143,372

 

 

2,435

 

 

 

145,807

 

 

 

 

 

 

 

 

 

 

 

 

Other long-term liabilities

 

14,846

 

 

-

 

 

 

14,846

 

Postretirement benefits

 

14,842

 

 

-

 

 

 

14,842

 

Long-term debt

 

141,147

 

 

(15,704

)

(d)

 

125,443

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

     Common stock, voting, no par value; 50,000 shares
       authorized; 20,053 shares outstanding

 


116,476

 

 


-

 

 

 


116,476

 

     Preferred stock, no par value, 10,000
       shares authorized; no shares outstanding

 

-

 

 


-

 

 

 

-

 

     Accumulated other comprehensive loss

 

(2,514

)

 

-

 

 

 

(2,514

)

     Accumulated deficit

 

(12,362

)

 

4,292

 

(b) (c)

 

(8,070

)

     Total shareholders' equity

 

101,600

 

 

4,292

 

 

 

105,892

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

415,807

 

$

(8,977

)

 

$

406,830

 

See notes to unaudited pro forma condensed consolidated balance sheets and statements of operations.




3

SPARTAN STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 29, 2003
(In thousands, except per share data)

 


As Reported

    

Pro Forma
Adjustments

    


Pro Forma
                       

Net sales

$

2,148,067

    

$

(150,993

)

(a) (e)

$

1,997,074

  

Cost of goods sold

 

1,774,350

    

 

(143,396

)

(a) e)

 

1,630,954

  

Gross margin

  

373,717

      

(7,597

)

    

366,120

  
                       

Operating expenses

                      

   Selling, general and administrative

  

360,786

      

(5,062

)

(a)

  

355,724

  

   Provision for asset impairments and exit costs

 

47,711

    

 

-

    

 

47,711

  

Total operating expenses

  

408,497

      

(5,062

)

    

403,435

  
                       

Operating loss

  

(34,780

)

    

(2,535

)

    

(37,315

)
                       

Other income and expenses

                      

   Interest expense

  

18,125

      

(804

)

(a)

  

17,321

  

   Interest income

  

(696

)

    

-

      

(696

)

   Other gains, net

 

(135

)

  

 

101

  

(a)

 

(34

)

Total other income and expenses

 

17,294

    

 

(703

)

  

 

16,591

  

Loss before income taxes and
    discontinued operations and cumulative
    effect of a change in accounting principle

  

 

(52,074



)

    

 

(1,832



)

    

 

(53,906



)

    Income taxes

 

(18,087

)

  

 

(706

)

(a)

 

(18,793

)

Loss from continuing operations

  

(33,987

)

    

(1,126

)

    

(35,113

)

Loss from discontinued operations, net of taxes

  

(52,968

)

    

4,292

  

(b) (c) (d)

 

(48,676

)

Cumulative effect of a change in
    accounting principle, net of taxes


 


(35,377


)

  


 


-

    


 


(35,377


)

Net loss

$

(122,332

)

  

$

3,166

    

$

(119,166

)
                       

Basic and diluted loss per share:

                      

Loss from continuing operations

$

(1.71

)

  

$

(0.05

)

  

$

(1.76

)

Loss from discontinued operations

  

(2.66

)

    

0.21

      

(2.45

)

Cumulative effect of a change in accounting principle

 

(1.78

)

  

 

-

    

 

(1.78

)

Net loss

$

(6.15

)

  

$

0.16

    

$

(5.99

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares:
      Basic and Diluted


 


19,896

            


 


19,896

  

See notes to unaudited pro forma condensed consolidated balance sheets and statements of operations.






4

SPARTAN STORES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE QUARTERS (40 WEEKS) ENDED JANUARY 3, 2004
(In thousands, except per share data)

 


As Reported

    

Pro Forma
Adjustments

    


Pro Forma
                       

Net sales

$

1,598,059

    

$

15,202

  

(e)

$

1,613,261

  

Cost of goods sold

 

1,302,905

    

 

14,442

  

(e)

 

1,317,347

  

Gross margin

  

295,154

      

760

      

295,914

  
                       

Selling, general and administrative expenses

 

282,675

    

 

-

    

 

282,675

  
                       

Operating earnings

  

12,479

      

760

      

13,239

  
                       

Other income and expenses

                      

   Interest expense

  

10,990

      

-

      

10,990

  

Debt extinguishment

  

8,798

              

8,798

  

   Interest income

  

(503

)

    

-

      

(503

)

   Other gains, net

 

3

    

 

-

    

 

3

  

Total other income and expenses

 

19,288

    

 

-

    

 

19,288

  

Loss before income taxes and
    discontinued operations

  


(6,809


)

    


760

      


(6,049


)

    Income taxes

 

(2,380

)

  

 

266

  

(e)

 

(2,114

)

Loss from continuing operations

  

(4,429

)

    

494

      

(3,935

)

Loss (earnings) from discontinued operations,
   net of taxes


 


(3,993


)

  


 


4,048

  


(a) (b) (c) (d)


 


55

  

Net loss

$

(8,422

)

  

$

4,542

    

$

(3,880

)
                       

Basic and diluted loss per share:

                      

Loss from continuing operations

$

(0.22

)

  

$

0.02

    

$

(0.20

)

(Loss) earnings from discontinued operations

 

(0.20

)

  

 

0.20

    

 

0.00

  

Net loss

$

(0.42

)

  

$

0.22

    

$

(0.20

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares:
      Basic and Diluted


 


19,999

            


 


19,999

  

See notes to unaudited pro forma condensed consolidated balance sheets and statements of operations.








5

SPARTAN STORES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF OPERATIONS AS OF AND
FOR THE YEAR ENDED MARCH 29, 2003 AND THE THREE QUARTERS (40 WEEKS)
ENDED JANUARY 3,2004
(In thousands)

(a)

To eliminate the operations of United Wholesale Grocery Company.

 

 

(b)

To record disposition of assets, gain on assets and related tax effects.

 

 

(c)

To reflect estimated transaction costs including severance, legal and accounting fees.

 

 

(d)

To record reduction of borrowings made with proceeds received from transactions and related interest expense effects, net of tax effect.

 

 

(e)

To record the impact of the customer supply agreement on sales to United Wholesale Grocery Company.

 

 

(f)

The following table details the results of discontinued operations reported on the unaudited pro forma condensed consolidated Statements of Operations by operating segment:

 

Year Ended March 29, 2003

  
 


As Reported

    

Pro Forma
Adjustments

  


Pro Forma

  

Discontinued retail operations

                    

(Loss) from discontinued retail operations (less applicable taxes of
   ($30,710))

$


(56,104


)

  


$


-

  


$


(56,104


)
                     

Discontinued convenience distribution operations

                    

Earnings from discontinued operations (less applicable taxes of
   $896)

  


1,923

            


1,923

  

Gain on disposal of discontinued operations (less applicable taxes
   of $32, $2,311 and $2,343)


 


59

    


 


4,292

  


 


4,351

  

Earnings from discontinued convenience distribution
   operations

  


1,982

      


4,292

    


6,274

  
                     

Discontinued grocery distribution operations

                    

Loss from discontinued operations (less applicable taxes of
   ($4,670))

  


(8,727


)

    


-

    


(8,727


)
                     

Discontinued real estate operations

                    

Loss from discontinued operations (less applicable taxes of ($397)

  

(736

)

    

-

    

(736

)

Gain on disposal of discontinued operations (less applicable taxes
   of $6,509)


 


12,077

    


 


-

  


 


12,077

  

Earnings from discontinued real estate operations

  

11,341

      

-

    

11,341

  
                     

Discontinued insurance operations

                    

Loss from discontinued operations (less applicable taxes of
   ($784))


 


(1,460


)

  


 


-

  


 


(1,460


)
                     

Total discontinued operations

                    

Loss from discontinued operations (less applicable taxes of
   ($35,665))

  


(65,104


)

          


(65,104


)

Gain on disposal of discontinued operations (less applicable taxes
   of $6,541, $2,311 and $8,852)


 


12,136

    


 


4,292

  


 


16,428


Total loss from discontinued operations

$

(52,968

)

  

$

4,292

  

$

(48,676

)

6

 

Three Quarters (40 Weeks) Ended
January 3, 2004
 


As Reported

    

Pro Forma
Adjustments

      


Pro Forma

Discontinued retail operations

                      

Loss from discontinued retail operations (less applicable taxes of
   ($3,378))


$


(6,273


)

  


$


-

    


$


(6,273


)

Gain on disposal of discontinued operations (less applicable taxes
   of $384)


 


714

    


 


-

    


 


714

  

Loss from discontinued retail operations

  

(5,559

)

    

-

      

(5,559

)
                       

Discontinued convenience distribution operations

                      

Earnings from discontinued operations (less applicable taxes of
   $662, $166 and $828)

  


317

      


(244


)

    


73

  

Gain on disposal of discontinued operations (less applicable taxes
   of $643, $2,311 and $2,954)


 


1,195

    


 


4,292

    


 


5,487

  

Earnings from discontinued convenience distribution
   operations

  


1,512

      


4,048

      


5,560

  
                       

Discontinued grocery distribution, real estate and insurance
   operations

                      

Loss from discontinued operations (less applicable taxes of
   ($1,138))

  


(367


)

    


-

      


(367


)

Gain on disposal of discontinued operations (less applicable taxes
   of $227)


 


421

    


 


-

    


 


421

  

Earnings from discontinued grocery distribution, real estate
   and insurance operations

  


54

      


-

      


54

  
                       

Total discontinued operations

                      

Loss from discontinued operations (less applicable taxes of
   ($3,854), $166, ($3,688))

  


(6,323


)

    


(244


)

    


(6,567


)

Gain on disposal of discontinued operations (less applicable taxes
   of $1,255, $2,311 and $3,566)


 


2,330

    


 


4,292

    


 


6,622

  

Total (loss) earnings from discontinued operations

$

(3,993

)

  

$

4,048

    

$

55

  











7