ALBERTSONS COMPANIES, INC. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" within the meaning of the federal securities laws. The "forward-looking statements" include our current expectations, assumptions, estimates and projections about our business and our industry. They include statements relating to our future operating or financial performance which the Company believes to be reasonable at this time. You can identify forward-looking statements by the use of words such as "outlook," "may," "should," "could," "estimates," "predicts," "potential," "continue," "anticipates," "believes," "plans," "expects," "future" and "intends" and similar expressions which are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict, including, among others, changes in macroeconomic conditions, the retail consumer behavior and environment and the Company's industry, failure to achieve productivity initiatives, increased rates of food price inflation and factors related to the continued impact of the COVID-19 pandemic, about which there are still many unknowns, including its duration, recurrence, new virus strains, status and effectiveness of vaccinations, duration and scope of related government orders, financial assistance programs, mandates and regulations and the extent of the overall impact to our business and the communities we serve. Such risks and uncertainties could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating forward-looking statements, you should carefully consider the risks and uncertainties more fully described in the "Risk Factors" section or other sections in our reports filed with theSEC including the most recent annual report on Form 10-K and any subsequent periodic reports on Form 10-Q and current reports on Form 8-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements and risk factors. Forward-looking statements contained in this Form 10-Q reflect our view only as of the date of this Form 10-Q. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. As used in this Form 10-Q, unless the context otherwise requires, references to "Albertsons," the "Company," "we," "us" and "our" refer toAlbertsons Companies, Inc. and, where appropriate, its subsidiaries.
NON-GAAP FINANCIAL MEASURES
We define EBITDA as generally accepted accounting principles ("GAAP") earnings
(net loss) before interest, income taxes, depreciation and amortization. We
define Adjusted EBITDA as earnings (net loss) before interest, income taxes,
depreciation and amortization, further adjusted to eliminate the effects of
items management does not consider in assessing our ongoing core performance. We
define Adjusted net income as GAAP Net income adjusted to eliminate the effects
of items management does not consider in assessing our ongoing core performance.
We define Adjusted net income per Class A common share as Adjusted net income
divided by the weighted average diluted Class A common shares outstanding, as
adjusted to reflect all restricted stock units ("RSUs") and restricted common
stock ("RSAs") outstanding at the end of the period. We define Net Debt as total
debt (which includes finance lease obligations and is net of deferred financing
costs and original issue discount) minus unrestricted cash and cash equivalents
and we define Net Debt Ratio as the ratio of Net Debt to Adjusted EBITDA for the
rolling 52 or 53 week period. See "Results of Operations" for further discussion
and a reconciliation of Adjusted EBITDA, Adjusted net income and Adjusted net
income per Class A common share.
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per Class A
common share (collectively, the "Non-GAAP Measures") are performance measures
that provide supplemental information we believe is useful to analysts and
investors to evaluate our ongoing results of operations, when considered
alongside other GAAP measures such as Net income, operating income and gross
profit. These Non-GAAP Measures exclude
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the financial impact of items management does not consider in assessing our
ongoing core operating performance, and thereby provide useful measures to
analysts and investors of our operating performance on a period-to-period basis.
Other companies may have different definitions of Non-GAAP Measures and provide
for different adjustments, and comparability to our results of operations may be
impacted by such differences. We also use Adjusted EBITDA and Net Debt Ratio for
board of director and bank compliance reporting. Our presentation of Non-GAAP
Measures should not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items.
Non-GAAP Measures should not be considered as measures of discretionary cash
available to us to invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using Non-GAAP Measures
only for supplemental purposes.
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SECOND QUARTER OF FISCAL 2021 OVERVIEW
Given the significant variations that occurred in our business during fiscal 2020 due to the COVID-19 pandemic, we provide a supplemental comparison of the 12 and 28 weeks endedSeptember 11, 2021 ("second quarter of fiscal 2021" and "first 28 weeks of fiscal 2021") to the 12 and 28 weeks endedSeptember 7, 2019 ("second quarter of fiscal 2019" and "first 28 weeks of fiscal 2019") for certain financial measures to demonstrate the two-year growth in our business in addition to comparisons to the 12 and 28 weeks endedSeptember 12, 2020 ("second quarter of fiscal 2020" and "first 28 weeks of fiscal 2020"). As ofSeptember 11, 2021 , we operated 2,278 retail food and drug stores with 1,725 pharmacies, 401 associated fuel centers, 22 dedicated distribution centers and 20 manufacturing facilities. With a strong consumer environment, we continue to make significant progress against all of our strategic priorities, including in-store excellence, accelerating our digital and omni-channel capabilities, increasing productivity and strengthening our talent and culture. Identical sales increased 1.5%, excluding fuel, during the second quarter of fiscal 2021, resulting in two-year stacked identical sales growth of 15.3%. We continue to gain market share in food market, and inMulti Outlet ("MULO") we are up on a two-year basis and down marginally on a one-year basis. Food market generally includes traditional supermarkets while MULO includes most food market, drug, mass merchants, club, dollar and military stores that sell food. Underscoring our strong omni-channel capabilities that allow customers to complete their shopping with us in any way they want, our digital initiatives continue to resonate with our customers, as evidenced by our sustained sales levels in the second quarter of fiscal 2021, digital sales increasing 5% compared to the second quarter of fiscal 2020 and a two-year stacked growth of 248%. During the second quarter of fiscal 2021, we expanded our Drive Up & Go curbside pickup service to approximately 1,900 locations and offer delivery services across more than 2,000 of our stores. In our delivery service, we have expanded first party locations, and continue to work with third party services to engage with customers on the platform of their choice. In addition to our continuing partnership with Instacart, we have expanded our partnership with DoorDash to offer on-demand grocery delivery service where customers can receive a broad assortment in under one hour. We also recently launched a similar partnership with Uber, where customers can order a full assortment of groceries on the Uber platform. With ongoing benefit enhancements, we continue to achieve significant success with our just for U loyalty program, which drives higher sales and customer retention, with membership growing 17% in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020, reaching 27.5 million members. Within the program, the number of actively engaged members, those that redeemed fuel or grocery rewards during the second quarter of fiscal 2021, increased by almost 9% compared to the second quarter of fiscal 2020, and our retention rate of actively engaged members was 93% in the second quarter of fiscal 2021. During the second quarter of fiscal 2021 we continued to roll out our Own Brands across all our banners, launching 85 new products and generating strong growth as our sales penetration increased by 60 basis points to 25.2% compared to the second quarter of fiscal 2020. We also continue to make significant progress on productivity initiatives, including promotional effectiveness, purchasing and procurement, labor efficiency and shrink. Our capital allocation strategy balances investing for the future, strengthening our balance sheet and returns to shareholders through a combination of dividends and opportunistic share repurchases. Capital expenditures were approximately$823 million during the first 28 weeks of fiscal 2021 as we opened seven new stores and completed 76 upgrades and remodels. Our balance sheet remains strong with a Net Debt Ratio of 1.3x as of the end of the second quarter of fiscal 2021. Capital returns to shareholders during the first 28 weeks of fiscal 2021 included our$0.10 per share quarterly dividend. OnOctober 18, 2021 , subsequent to the end of the second quarter of fiscal 2021, we announced a 20% increase to our quarterly dividend, which is now$0.12 per share of Class A common stock. 22
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In addition, we have continued to partner with the
Second quarter of fiscal 2021 highlights
In summary, our financial and operating highlights for the second quarter of fiscal 2021 include: •Identical sales increase of 1.5%; two-year identical sales stacked growth was 15.3% •Digital sales increased 5%; on a two-year stacked basis digital sales growth was 248% •Net income of$295 million , or$0.52 per Class A common share •Adjusted net income of$370 million , or$0.64 per Class A common share •Adjusted EBITDA of$965 million •Opened one new store and completed 43 remodel projects •Launched 153 new Drive Up & Go locations
Stores
The following table shows stores operating, acquired, opened and closed during
the periods presented:
12 weeks ended 28 weeks ended
September 11, September 12, September 11, September 12,
2021 2020 2021 2020
Stores, beginning of period 2,278 2,252 2,277 2,252
Acquired (1) - - 1 -
Opened 1 2 6 2
Closed (1) (2) (6) (2)
Stores, end of period 2,278 2,252 2,278 2,252
(1) The 28 weeks ended September 11, 2021 includes one store acquired from Kings
and Balducci's that transferred to us subsequent to the end of the fourth
quarter of fiscal 2020.
The following table summarizes our stores by size:
Number of stores Percent of Total Retail Square Feet (1)
September 11, September 12, September 11, September 12, September 11, September 12,
Square Footage 2021 2020 2021 2020 2021 2020
Less than 30,000 223 204 9.8 % 9.1 % 5.1 4.7
30,000 to 50,000 786 781 34.5 % 34.6 % 32.9 32.8
More than 50,000 1,269 1,267 55.7 % 56.3 % 75.0 74.8
Total Stores 2,278 2,252 100.0 % 100.0 % 113.0 112.3
(1) In millions, reflects total square footage of retail stores operating at the end of the period.
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Table of Contents RESULTS OF OPERATIONS
Comparison of Second Quarter of Fiscal 2021 and First 28 Weeks of Fiscal 2021 to Second Quarter of Fiscal 2020 and First 28 Weeks of Fiscal 2020:
The following tables and related discussion set forth certain information and
comparisons regarding the components of our Condensed Consolidated Statements of
Operations for the second quarter of fiscal 2021 and first 28 weeks of fiscal
2021 to the second quarter of fiscal 2020 and first 28 weeks of fiscal 2020 (in
millions, except per share data).
12 weeks ended
September 11, September 12,
2021 % of Sales 2020 % of Sales
Net sales and other revenue $ 16,505.7 100.0 % $ 15,757.6 100.0 %
Cost of sales 11,788.7 71.4 11,182.7 71.0
Gross profit 4,717.0 28.6 4,574.9 29.0
Selling and administrative expenses 4,231.3 25.6 4,031.2 25.6
Gain on property dispositions and impairment
losses, net (0.2) - (18.3) (0.1)
Operating income 485.9 3.0 562.0 3.5
Interest expense, net 109.3 0.7 128.6 0.8
Loss on debt extinguishment - - 49.1 0.3
Other income, net (18.9) (0.1) (11.4) (0.1)
Income before income taxes 395.5 2.4 395.7 2.5
Income tax expense 100.3 0.6 111.2 0.7
Net income $ 295.2 1.8 % $ 284.5 1.8 %
Basic net income per Class A common share $ 0.55 $ 0.52
Diluted net income per Class A common share 0.52 0.49
28 weeks ended
September 11, September 12,
2021 % of Sales 2020 % of Sales
Net sales and other revenue $ 37,775.1 100.0 % $ 38,509.2 100.0 %
Cost of sales 26,867.1 71.1 27,162.8 70.5
Gross profit 10,908.0 28.9 11,346.4 29.5
Selling and administrative expenses 9,734.9 25.8 9,800.6 25.5
Loss on property dispositions and impairment
losses, net 0.1 - 12.0 -
Operating income 1,173.0 3.1 1,533.8 4.0
Interest expense, net 262.6 0.7 309.2 0.8
Loss on debt extinguishment - - 49.1 0.1
Other income, net (62.4) (0.2) (8.3) -
Income before income taxes 972.8 2.6 1,183.8 3.1
Income tax expense 232.8 0.6 313.1 0.8
Net income $ 740.0 2.0 % $ 870.7 2.3 %
Basic net income per Class A common share $ 1.27 $ 1.57
Diluted net income per Class A common share 1.26 1.49
Net Sales and Other Revenue
Net sales and other revenue increased 4.7% to $16,505.7 million for the second
quarter of fiscal 2021 from $15,757.6 million for the second quarter of fiscal
2020. The increase in Net sales and other revenue was primarily driven by our
1.5% increase in identical sales, which includes an increase in pharmacy sales,
partially from
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administering COVID-19 vaccines, an increase in sales related to the stores acquired and opened since the second quarter of fiscal 2020 and higher fuel sales. Net sales and other revenue decreased 1.9% to$37,775.1 million for the first 28 weeks of fiscal 2021 from$38,509.2 million for the first 28 weeks of fiscal 2020. The decrease in Net sales and other revenue was primarily driven by our 5.3% decrease in identical sales, which was partially offset by an increase in pharmacy sales, primarily from administering COVID-19 vaccines, and an increase in sales related to the stores opened since the first 28 weeks of fiscal 2020 and higher fuel sales.
Identical Sales, Excluding Fuel
Identical sales include stores operating during the same period in both the current year and the prior year, comparing sales on a daily basis. Direct to consumer digital sales are included in identical sales, and fuel sales are excluded from identical sales. Acquired stores become identical on the one-year anniversary date of the acquisition. Identical sales for the 12 and 28 weeks endedSeptember 11, 2021 and the 12 and 28 weeks endedSeptember 12, 2020 , respectively, were: 12 weeks ended 28 weeks ended September 11, September 12, September 11, September 12, 2021 2020 2021 2020 Identical sales, excluding fuel 1.5% 13.8% (5.3)% 21.0% Gross Profit Gross profit represents the portion of Net sales and other revenue remaining after deducting Cost of sales during the period, including purchase and distribution costs. These costs include, among other things, purchasing and sourcing costs, inbound freight costs, product quality testing costs, warehouse and distribution costs, Own Brands program costs and digital-related delivery and handling costs. Advertising, promotional expenses and vendor allowances are also components of Cost of sales. Gross profit margin decreased to 28.6% during the second quarter of fiscal 2021 compared to 29.0% during the second quarter of fiscal 2020. Excluding the impact of fuel, gross profit margin was flat compared to the second quarter of fiscal 2020, primarily due to higher product, supply chain and advertising costs, offset by benefits related to productivity initiatives, favorable product mix and improved pharmacy margins related to administering COVID-19 vaccines. Gross profit margin decreased to 28.9% during the first 28 weeks of fiscal 2021 compared to 29.5% during the first 28 weeks of fiscal 2020. Excluding the impact of fuel, gross profit margin increased five basis points compared to the first 28 weeks of fiscal 2020. The increase in gross profit margin was primarily driven by productivity initiatives, favorable product mix and improved pharmacy margins related to administering COVID-19 vaccines, partially offset by sales deleverage and higher product and supply chain costs.
Selling and Administrative Expenses
Selling and administrative expenses consist primarily of store level costs, including wages, employee benefits, rent, depreciation and utilities, in addition to certain back-office expenses related to our corporate and division offices.
Selling and administrative expenses were 25.6% of Net sales and other revenue
during the second quarter of fiscal 2021 and the second quarter of fiscal 2020.
Excluding the impact of fuel, Selling and administrative expenses as a
percentage of Net sales and other revenue increased 55 basis points during the
second quarter of fiscal 2021 compared to the second quarter of fiscal 2020. The
increase in Selling and administrative expenses as a percentage
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of Net sales and other revenue was primarily attributable to employee costs, depreciation and other expenses related to our investments in our digital and omni-channel capabilities and strategic priorities. The increase in employee costs was the result of additional labor related to reopening fresh departments, market-driven retail wage rate increases and higher equity-based compensation expense. These increases were partially offset by lower COVID-19 related costs and execution of productivity initiatives. Selling and administrative expenses increased to 25.8% of Net sales and other revenue during the first 28 weeks of fiscal 2021 compared to 25.5% of Net sales and other revenue for the first 28 weeks of fiscal 2020. Excluding the impact of fuel, Selling and administrative expenses as a percentage of Net sales and other revenue increased 90 basis points during the first 28 weeks of fiscal 2021 compared to the first 28 weeks of fiscal 2020. The increase in Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to sales deleverage, together with higher employee costs, depreciation and other expenses related to our investments in our digital and omni-channel capabilities and strategic priorities. The increase in employee costs was the result of additional labor related to reopening of fresh departments, market-driven retail wage rate increases and higher equity-based compensation expense. These increases were partially offset by lower COVID-19 related costs and execution of productivity initiatives.
(Gain) Loss on Property Dispositions and Impairment Losses, Net
For the second quarter of fiscal 2021, net gain on property dispositions and impairment losses was$0.2 million , primarily driven by$6.2 million of gains from the sale of assets, partially offset by$6.0 million of intangible asset impairment. For the second quarter of fiscal 2020, net gain on property dispositions and impairment losses was$18.3 million , primarily driven by$20.0 million of gains from the sale of assets, partially offset by$1.7 million of asset impairments. For the first 28 weeks of fiscal 2021, net loss on property dispositions and impairment losses was$0.1 million , primarily driven by$15.9 million of asset impairments, primarily related to right-of-use assets and intangible assets, partially offset by$15.8 million of gains from the sale of assets. For the first 28 weeks of fiscal 2020, net loss on property dispositions and impairment losses was$12.0 million , primarily driven by$22.8 million of asset impairments, primarily related to right-of-use assets, partially offset by$10.8 million of gains from the sale of assets.
Interest Expense, Net
Interest expense, net was$109.3 million during the second quarter of fiscal 2021 compared to$128.6 million during the second quarter of fiscal 2020. The decrease in interest expense was primarily attributable to lower average outstanding borrowings and lower average interest rates. The weighted average interest rate during the second quarter of fiscal 2021 was 5.4%, excluding deferred financing costs and original issue discount, compared to 6.0% during the second quarter of fiscal 2020. Interest expense, net was$262.6 million during the first 28 weeks of fiscal 2021 compared to$309.2 million during the first 28 weeks of fiscal 2020. The decrease in interest expense was primarily attributable to lower average outstanding borrowings and lower average interest rates. The weighted average interest rate during first 28 weeks of fiscal 2021 was 5.5%, excluding deferred financing costs and original issue discount, compared to 6.0% during the first 28 weeks of fiscal 2020. 26
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Table of Contents Loss of Debt Extinguishment There was no loss on debt extinguishment during both the second quarter of fiscal 2021 and first 28 weeks of fiscal 2021, compared to loss on debt extinguishment of$49.1 million during both the second quarter of fiscal 2020 and first 28 weeks of fiscal 2020. The loss on debt extinguishment during the second quarter and first 28 weeks of fiscal 2020 primarily consisted of a redemption premium payment and write-off of debt discounts associated with the redemption of the Company's 6.625% Senior Unsecured Notes due 2024 (the "2024 Notes"). Other Income, Net For the second quarter of fiscal 2021, Other income, net was$18.9 million compared to$11.4 million for the second quarter of fiscal 2020. Other income, net during the second quarter of fiscal 2021 was primarily driven by non-service cost components of net pension and post-retirement expense and income related to our equity investment, partially offset by unrealized losses from non-operating investments. Other income, net during the second quarter of fiscal 2020 was primarily driven by non-service cost components of net pension and post-retirement expense and income related to our equity investment. For the first 28 weeks of fiscal 2021, Other income, net was$62.4 million compared to$8.3 million for the first 28 weeks of fiscal 2020. Other income, net during the first 28 weeks of fiscal 2021 was primarily driven by non-service cost components of net pension and post-retirement expense, realized gains from non-operating investments and income related to our equity investment, partially offset by unrealized losses from non-operating investments. Other income, net during the first 28 weeks of fiscal 2020 was primarily driven by non-service cost components of net pension and post-retirement expense and income related to our equity investment, partially offset by recognized losses on interest rate swaps and unrealized losses from non-operating investments.
Income Taxes
Income tax expense was$100.3 million , representing a 25.4% effective tax rate, for the second quarter of fiscal 2021. Income tax expense was$111.2 million , representing a 28.1% effective tax rate, for the second quarter of fiscal 2020. The decrease in the effective tax rate was primarily driven by nondeductible transaction-related costs incurred during the second quarter of fiscal 2020. Income tax expense was$232.8 million , representing a 23.9% effective tax rate, for the first 28 weeks of fiscal 2021. Income tax expense was$313.1 million , representing a 26.4% effective tax rate, for the first 28 weeks of fiscal 2020. The decrease in the effective income tax rate was primarily driven by the recognition of discrete state income tax benefits during the first 28 weeks of fiscal 2021 and certain nondeductible transaction-related costs incurred during the first 28 weeks of fiscal 2020.
We currently expect our annual effective tax rate for fiscal 2021 to be in the range of approximately 23% to 24%.
Net Income and Adjusted Net Income
Net income was$295.2 million , or$0.52 per Class A common share, during the second quarter of fiscal 2021 compared to$284.5 million , or$0.49 per Class A common share, during the second quarter of fiscal 2020. Adjusted net income was$369.5 million , or$0.64 per Class A common share, during the second quarter of fiscal 2021 compared to$356.4 million , or$0.60 per Class A common share, during the second quarter of fiscal 2020. Net income was$740.0 million , or$1.26 per Class A common share, during the first 28 weeks of fiscal 2021 compared to$870.7 , or$1.49 per Class A common share, during the first 28 weeks of fiscal 2020. Adjusted net income was$887.0 million , or$1.53 per Class A common share, during the first 28 weeks of fiscal 2021 compared to$1,157.6 million , or$1.95 per Class A common share, during the first 28 weeks of fiscal 2020. 27
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Table of Contents Adjusted EBITDA For the second quarter of fiscal 2021, Adjusted EBITDA was$965.4 million , or 5.8% of Net sales and other revenue, compared to$948.4 million , or 6.0% of Net sales and other revenue, for the second quarter of fiscal 2020. The increase in Adjusted EBITDA was primarily the result of an increase in Net sales and other revenue, partially offset by an increase in Selling and administrative expenses. For the first 28 weeks of fiscal 2021, Adjusted EBITDA was$2,273.5 million , or 6.0% of Net sales and other revenue, compared to$2,639.4 million , or 6.9% of Net sales and other revenue for the first 28 weeks of fiscal 2020. The decrease in Adjusted EBITDA was primarily the result of a decrease in Net sales and other revenue.
Supplemental Two-Year Results - Comparison of Second Quarter of Fiscal 2021 to Second Quarter of Fiscal 2019
The following table provides a comparison of the second quarter of fiscal 2021
to the second quarter of fiscal 2019 for certain financial measures, including a
compounded annual growth rate ("CAGR"), to demonstrate the two-year growth in
our business. We believe these supplemental comparisons provide meaningful and
useful information to investors about the trends in our business relative to
pre-COVID-19 pandemic periods. These comparisons should not be reviewed in
isolation or considered substitutes for our financial results included elsewhere
in this Form 10-Q.
Second Quarter of Fiscal 2021
Supplemental Two-Year Results
Identical sales two-year stacked (1) 15.3 %
Net income per Class A common share two-year CAGR (2) 1.0 %
Adjusted net income per Class A common share two-year CAGR 94.0 %
Net income two-year CAGR (2) 0.1 %
Adjusted net income two-year CAGR 93.0 %
Adjusted EBITDA two-year CAGR 30.4 %
Margins:
Gross profit (1) Increased 85 basis points
Selling and administrative expenses (1) Decreased 120 basis points
(1) Excluding fuel. (2) The net income per Class A common share two-year CAGR and net income two-year CAGR are impacted by gains related to sale leaseback transactions in the second quarter of fiscal 2019. Net sales and other revenue was$16.5 billion during the second quarter of fiscal 2021 compared to$14.2 billion during the second quarter of fiscal 2019. The increase in sales compared to the second quarter of fiscal 2019 was primarily due to the 15.3% increase in two-year stacked identical sales. Identical sales were driven in part by the 248% two-year stacked increase in digital sales. Gross profit margin was 28.6% during the second quarter of fiscal 2021 compared to 27.8% during the second quarter of fiscal 2019. Excluding the impact of fuel, gross profit margin increased by approximately 85 basis points compared to the second quarter of fiscal 2019, primarily driven by sales leverage, improvements in shrink expense, productivity initiatives and improved pharmacy margins related to administering COVID-19 vaccines, partially offset by growth in digital sales and an increase in supply chain costs and COVID-19 expenses. 28
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Selling and administrative expenses were 25.6% of sales during the second
quarter of fiscal 2021 compared to 26.8% of sales for the second quarter of
fiscal 2019. Excluding the impact of fuel, selling and administrative expenses
as a percentage of sales decreased approximately 120 basis points primarily due
to sales leverage and the execution of productivity initiatives, partially
offset by increases in employee costs and other expenses related to our
investments in our digital and omni-channel capabilities and strategic
priorities and increased market driven retail wage rates, higher equity-based
compensation expense as well as incremental COVID-19 expenses.
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Reconciliation of Non-GAAP Measures
The following tables reconcile Net income to Adjusted net income, and Net income
per Class A common share to Adjusted net income per Class A common share (in
millions, except per share data):
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Numerator:
Net income $ 295.2 $ 284.5 $ 294.8
Adjustments:(Gain) loss on interest rate and commodity hedges, net (d)
(1.2) 1.4 -
Facility closures and transformation (1)(b) 14.8 6.1 -
Acquisition and integration costs (2)(b) 3.4 2.2 7.5
Equity-based compensation expense (b) 26.8 9.3 6.5
(Gain) loss on property dispositions and impairment
losses, net (3) (0.2) (18.3) (435.5)
LIFO expense (a) 14.6 10.1 5.8
Government-mandated incremental COVID-19 pandemic
related pay (4)(b) 18.3 - -
Civil disruption related costs (5)(b) - (1.9) -
Transaction and reorganization costs related to
Convertible Preferred Stock issuance and initial
public offering (b) - 4.1 -
Amortization of debt discount and deferred financing costs (c)
4.7 4.7 35.4
Loss on debt extinguishment - 49.1 23.1
Amortization of intangible assets resulting from
acquisitions (b) 11.5 13.1 68.9
Miscellaneous adjustments (6)(f) 5.1 13.3 24.3
Tax impact of adjustments to Adjusted net income (23.5) (21.3) 68.4
Adjusted net income $ 369.5 $ 356.4 $ 99.2
Denominator:
Weighted average Class A common shares outstanding - diluted
573.0 582.9 580.6
Adjustments:
Restricted stock units and awards (7) 8.1 9.6 7.6 Adjusted weighted average Class A common shares outstanding - diluted 581.1 592.5 588.2
Adjusted net income per Class A common share - diluted
$ 0.60 $ 0.17
Supplemental Two-Year CAGR:
Net income two-year CAGR 0.1 %
Adjusted net income two-year CAGR 93.0 %
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12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Net income per Class A common share - diluted
0.49 $ 0.51
Non-GAAP adjustments (8) 0.13 0.12 (0.33)
Restricted stock units and awards (7) (0.01) (0.01) (0.01)
Adjusted net income per Class A common share -
diluted $ 0.64 $ 0.60 $ 0.17
Supplemental Two-Year CAGR:
Net income per Class A common share two-year
CAGR 1.0 %
Adjusted net income per Class A common share
two-year CAGR 94.0 %
The following table is a reconciliation of Adjusted net income to Adjusted
EBITDA:
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Adjusted net income (9) $ 369.5 $ 356.4 $ 99.2
Tax impact of adjustments to Adjusted net
income 23.5 21.3 (68.4)
Income tax expense 100.3 111.2 81.9
Amortization of debt discount and deferred
financing costs (c) (4.7) (4.7) (35.4)
Interest expense, net 109.3 128.6 177.5
Amortization of intangible assets resulting
from acquisitions (b) (11.5) (13.1) (68.9)
Depreciation and amortization (e) 379.0 348.7 381.7
Adjusted EBITDA $ 965.4 $ 948.4 $ 567.6
Supplemental Two-Year CAGR:
Adjusted EBITDA two-year CAGR 30.4 %
(1) Includes costs related to closures of operating facilities and third-party
consulting fees related to our strategic priorities and associated business
transformation.
(2) Related to conversion activities and related costs associated with
integrating acquired businesses. Also includes expenses related to management
fees in prior periods paid in connection with acquisition and financing
activities.
(3) Primarily due to gains related to sale leaseback transactions in the second
quarter of fiscal 2019.
(4) Represents incremental pay that is legislatively required in certain
municipalities in which we operate.
(5) Primarily includes costs related to store damage, inventory losses and
community support as a result of the civil disruption during late May 2020 and
early June 2020 in certain markets.
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(6) Miscellaneous adjustments include the following (see table below):
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Non-cash lease-related adjustments $ 1.0 $ (0.1) $ 4.4
Lease and lease-related costs for surplus and
closed stores 6.5 10.8 5.2
Net realized and unrealized (gain) loss on
non-operating investments 12.8 0.2 10.8
Other (i) (15.2) 2.4 3.9
Total miscellaneous adjustments $ 5.1 $ 13.3 $ 24.3
(i) Primarily includes adjustments for pension settlement gain, certain legal
and regulatory accruals, unconsolidated equity investments and certain contract
termination costs.
(7) Represents incremental unvested RSUs and unvested RSAs to adjust the diluted
weighted average Class A common shares outstanding during each respective period
to the fully outstanding RSUs and RSAs as of the end of each respective period.
(8) Reflects the per share impact of Non-GAAP adjustments for each period. See
the reconciliation of Net income to Adjusted net income above for further
details.
(9) See the reconciliation of Net income to Adjusted net income above for
further details.
Non-GAAP adjustment classifications within the Consolidated Statement of
Operations:
(a) Cost of sales
(b) Selling and administrative expenses
(c) Interest expense, net
(d) (Gain) loss on interest rate and commodity hedges, net:
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Cost of sales $ (1.2) $ 1.0 $ -
Other income, net - 0.4 -
Total (Gain) loss on interest rate and
commodity hedges, net $ (1.2) $ 1.4 $ -
(e) Depreciation and amortization:
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Cost of sales $ 36.0 $ 40.1 $ 38.0
Selling and administrative expenses 343.0 308.6 343.7
Total Depreciation and amortization $ 379.0 $ 348.7 $ 381.7
(f) Miscellaneous adjustments:
12 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Selling and administrative expenses $ 3.4 $ 9.9 $ 9.6
Other income, net 1.7 3.4 14.7
Total Miscellaneous adjustments $ 5.1 $ 13.3 $ 24.3
32
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28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Numerator:
Net income $ 740.0 $ 870.7 $ 343.8
Adjustments:(Gain) loss on interest rate and commodity hedges, net (d)
(7.5) 25.9 0.3
Facility closures and transformation (1)(b) 35.6 15.9 -
Acquisition and integration costs (2)(b) 6.9 8.5 33.6
Equity-based compensation expense (b) 49.0 28.3 17.6
Loss (gain) on property dispositions and impairment losses, net (3)
0.1 12.0 (464.0)
LIFO expense (a) 29.1 23.2 16.3
Discretionary COVID-19 pandemic related costs (4)(b) - 89.9 -
Government-mandated incremental COVID-19 pandemic
related pay (5)(b) 47.4 - -
Civil disruption related costs (6)(b) - 13.0 -
Transaction and reorganization costs related to
Convertible Preferred Stock issuance and initial
public offering (b) - 24.4 -
Amortization of debt discount and deferred financing costs (c)
11.1 11.2 43.8
Loss on debt extinguishment - 49.1 65.8
Amortization of intangible assets resulting from
acquisitions (b) 27.6 30.6 161.7
Miscellaneous adjustments (7)(f) (5.7) 47.4 33.1
Tax impact of adjustments to Adjusted net income (46.6) (92.5) 23.7
Adjusted net income $ 887.0 $ 1,157.6 $ 275.7
Denominator:
Weighted average Class A common shares outstanding - diluted
470.6 583.3 580.0
Adjustments:
Convertible Preferred Stock (8) 101.6 - - Restricted stock units and awards (9) 8.8 9.2 8.2 Adjusted weighted average Class A common shares outstanding - diluted 581.0 592.5 588.2
Adjusted net income per Class A common share - diluted
$ 1.95 $ 0.47
Supplemental Two-Year CAGR:
Net income two-year CAGR 46.7 %
Adjusted net income two-year CAGR 79.4 %
33--------------------------------------------------------------------------------
Table of Contents
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Net income per Class A common share - diluted
1.49 $ 0.59
Convertible Preferred Stock (8) 0.03 - -
Non-GAAP adjustments (10) 0.26 0.49 (0.11)
Restricted stock units and awards (9) (0.02) (0.03) (0.01)
Adjusted net income per Class A common share -
diluted $ 1.53 $ 1.95 $ 0.47
Supplemental Two-Year CAGR:
Net income per Class A common share two-year
CAGR 46.1 %
Adjusted net income per Class A common share
two-year CAGR 80.4 %
The following table is a reconciliation of Adjusted net income to Adjusted
EBITDA:
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Adjusted net income (11) $ 887.0 $ 1,157.6 $ 275.7
Tax impact of adjustments to Adjusted net
income 46.6 92.5 (23.7)
Income tax expense 232.8 313.1 97.6
Amortization of debt discount and deferred
financing costs (c) (11.1) (11.2) (43.8)
Interest expense, net 262.6 309.2 402.7
Amortization of intangible assets resulting
from acquisitions (b) (27.6) (30.6) (161.7)
Depreciation and amortization (e) 883.2 808.8 897.6
Adjusted EBITDA $ 2,273.5 $ 2,639.4 $ 1,444.4
Supplemental Two-Year CAGR:
Adjusted EBITDA two-year CAGR 25.5 %
(1) Includes costs related to closures of operating facilities and third-party
consulting fees related to our strategic priorities and associated business
transformation.
(2) Related to conversion activities and related costs associated with
integrating acquired businesses. Also includes expenses related to management
fees in prior periods paid in connection with acquisition and financing
activities.
(3) Primarily due to gains related to sale leaseback transactions in the second
quarter of fiscal 2019.
(4) Includes $53 million of charitable contributions to our communities for
hunger relief and $36.9 million in final reward payments to front-line
associates at the end of the first quarter of fiscal 2020.
(5) Represents incremental pay that is legislatively required in certain
municipalities in which we operate.
(6) Primarily includes costs related to store damage, inventory losses and
community support as a result of the civil disruption during late May 2020 and
early June 2020 in certain markets.
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Table of Contents
(7) Miscellaneous adjustments include the following (see table below):
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Non-cash lease-related adjustments $ 3.1 $ 1.9 $ 6.3
Lease and lease-related costs for surplus and
closed stores 16.7 29.5 12.0
Net realized and unrealized (gain) loss on
non-operating investments (9.7) 4.7 7.5
Other (i) (15.8) 11.3 7.3
Total miscellaneous adjustments $ (5.7) $ 47.4 $ 33.1
(i) Primarily includes adjustments for pension settlement gain, certain legal
and regulatory accruals, unconsolidated equity investments and certain contract
termination costs.
(8) Represents the conversion of Convertible Preferred Stock to the fully
outstanding as-converted Class A common shares as of the end of each respective
period, for periods in which the Convertible Preferred Stock is antidilutive
under GAAP.
(9) Represents incremental unvested RSUs and unvested RSAs to adjust the diluted
weighted average Class A common shares outstanding during each respective period
to the fully outstanding RSUs and RSAs as of the end of each respective period.
(10) Reflects the per share impact of Non-GAAP adjustments for each period. See
the reconciliation of Net income to Adjusted net income above for further
details.
(11) See the reconciliation of Net income to Adjusted net income above for
further details.
Non-GAAP adjustment classifications within the Consolidated Statement of
Operations:
(a) Cost of sales
(b) Selling and administrative expenses
(c) Interest expense, net
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Table of Contents
(d) (Gain) loss on interest rate and commodity hedges, net:
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Cost of sales $ (7.8) $ 6.5 $ 0.3
Other income, net 0.3 19.4 -
Total (Gain) loss on interest rate and
commodity hedges, net $ (7.5) $ 25.9 $ 0.3
(e) Depreciation and amortization:
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Cost of sales $ 86.8 $ 94.1 $ 90.0
Selling and administrative expenses 796.4 714.7 807.6
Total Depreciation and amortization $ 883.2 $ 808.8 $ 897.6
(f) Miscellaneous adjustments:
28 weeks ended
September 11, September 12, September 7, 2019
2021 2020 Supplemental
Selling and administrative expenses $ 10.2 $ 34.7 $ 16.7
Other income, net (15.9) 12.7 16.4
Total Miscellaneous adjustments $ (5.7) $ 47.4 $ 33.1
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