SpartanNash Company

Good day and welcome to the Spartan Nash Company fourth quarter and fiscal year 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the call over to Chris Mandeville, Investor Relations. Please go ahead.

Good morning, and welcome to the Spartan Nash Company fourth quarter fiscal year 2021 earnings conference call. On the call today from the company, our President and Chief Executive Officer, Tony Sarson, and Executive Vice President and Chief Financial Officer, Jason Monaco. By now, everyone should have access to the earnings release, which was issued this morning at approximately 6 a.m. Eastern time. For a copy of the earnings release, as well as the company's supplemental earnings presentation, please visit Spartan Nash's website at www.spartannash.com forward slash investors. This call is being recorded and a replay will be available on the company's website for approximately 10 days. Before we begin, the company would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to Spartan Nash's earnings release from this morning, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember, Spartan Nash undertakes no obligation to update or revise these forward-looking statements. The company will also make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business, and it has included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. And with that, it's now my pleasure to turn the call over to Tony.

Thank you, Chris, and good morning, everyone. I'm excited to review Spartan Nash's 2021 performance with you today and look ahead to our 2022 strategy. First, let's talk about the year at a high level. As of today, we're almost two full years into the pandemic. Despite the unpredictable nature of COVID and its variants, Spartan Nash Associates, again, executed with excellence to serve our customers in 2021. Every person has been impacted by some way by COVID, yet our associates continuously ensure that our stores remained open, shelves were stocked, products were safely delivered, and our military heroes had the supplies they needed. Through our pharmacies, we ensured that patients had access to medication and testing that was critical in keeping our communities healthy. To date, we've administered over 150,000 vaccines. I'm incredibly proud of their efforts. Our top and bottom results for 2021 are squarely in line with the guidance we provided at the start of the year and have reaffirmed throughout. On a consolidated basis, we generated $8.9 billion in revenues and adjusted net earnings of $61 million, or $1.70 per diluted share. We also generated $161 million of cash flow from operations and paid down over $86 million of long-term debt to significantly improve our leverage. We did this while reinvesting in the business to support future growth and driving greater efficiencies. Our strong cash flow also enabled us to return over $34 million of shareholders in the form of dividends and stock repurchases. Touching briefly on our segment's fourth quarter performance, our retail segment grew top line with one year comps of 7.3%. We have continued to see strength in food at home consumption and increased store traffic. Despite the acute labor challenges, we've continued to execute remarkably well at the stores, which drove results. Lastly, our select net price increases had minimal impact on consumption. In our food and military distribution segments in particular, we continue to navigate through the industry-wide labor and supply chain pressures. We remain focused on our supply chain transformation initiative, which we believe will position the company for improved profitability and long-term success. We are seeing some tailwinds, including food inflation increases, which have improved our gross margin rates. So, despite facing steep comparisons to 2020 COVID demand, we're very happy with our 2021 performance as we grew our top line and met our profitability objectives. I'd like to turn now to progress we made during the year in executing against our strategic priorities. Since joining the company in late 2020, I have focused on driving change through our strategy, operating model, and culture to enhance profitable growth and shareholder returns. Over the past year, we've continued to strengthen our leadership team. We welcomed new executives in legal, marketing, merchandising, supply chain, strategy, and communications. Our two most recent management team additions include Amy McClellan, our new chief marketing officer, and Bennett Morgan, our new chief merchandising officer. And going into 2022, we have a new corporate identity that sets the strategic direction for growth and stewardship of Spartan Ash. Last year, we engaged more than 1,900 associates, customers, vendors, and partners to help us establish this identity, which we call our winning recipe. This identity will continue to guide the use of our time and resources. Our new mission is to deliver the ingredients for a better life. This mission expresses the difference we will make in the lives of our customers. We will get there by refining our signature strength, which is to be the most customer-focused, innovative food solutions company. We make good on these promises to our customers by investing in three core capabilities, people, operational excellence, and insights that drive solutions. I introduced these three core capabilities in our last earnings call, and these capabilities inform our five strategic priorities. And those five strategic priorities are, number one, creating a people-first culture. Two, elevating execution to win the day. Three, transforming the supply chain. Four, acting on insights to optimize customer and product portfolios. And five, launching customer-centric innovative solutions. I will take a few minutes now to discuss the strategic priorities in more detail. So, let's dive into our first strategic priority, which is creating a people-first culture. Last year, we made great strides to enhance our associate experience by investing in wages, benefits, safety, recognition, and communication. We provided an average of over 10% pay increases for all entry-level roles in retail and supply chain. We shortened the length of time for associates to become eligible for benefits, and we announced a new paid time off policy that provides associates with greater flexibility in how they use their time off. We implemented new retail and supply chain training programs, and we also made dramatic improvements with safety by improving our injury rate by 47%. While we expect the labor environment will continue to be a challenge, all the actions we are taking are critical to attracting and retaining top talent. Our second of our five strategic priorities is elevating execution to win the day. This involves increasing the automation to focus on more value-added activities and implementing winning technology solutions. In 2021, we made significant progress on our development of a comprehensive transportation management system. We will continue to invest in automation and technology to ensure we can execute more efficiently in 2022 and beyond. Moving to our third strategic priority, transforming the supply chain. To date, we have implemented sustainable supply chain improvements to drive savings, optimize our network footprint, and rationalized SKUs. In 2021, we closed two warehouses and opened a new distribution center in Severn, Maryland, which represented our most significant addition to the supply chain network in many years. This facility is alleviating the stress on some of our DCs in the short term and will support our growth in the long term. In addition, as you may have read a few weeks ago, we reached an agreement with Coastal Pacific Food Distributors to expand our distribution footprint on the West Coast. Through our partnership, we will launch operations out of Coastal's 500,000-square-foot multi-temperature distribution center in Stockton, California. This facility will begin servicing our customers next month. Having a West Coast presence allows us to provide faster, fresher, more cost-effective deliveries to our customers so they can ensure their shoppers have access to the critical food and household supplies they need. The arrangement will also save roughly 1 million gallons of diesel fuel annually by helping us reduce fleet mileage by 10 percent, or more than 7 million miles, beginning this year. This agreement also advances our work in ESG by reducing our carbon footprint through lower greenhouse gas emissions by an estimated 10,000 metric tons. As of today, we are on track with our initial cost savings of $15 million to $30 million from our supply chain transformation efforts. We expect that those savings will accelerate and begin to be accretive in 2022. Our fourth strategic priority is acting on insights to optimize customer and product portfolios. We are focused on positioning our military segment for success through a variety of tactics, including portfolio diversification. We are also working to expand customer profitability and services. As a food solutions company with deep expertise across retail, wholesale, and distribution, we are uniquely equipped to provide more insights and services to our customers. We're also working to tailor our retail assortment to align with local community preferences and continue enhancing our upmarket retail experience. Our fifth and final strategic priority is launching customer-centric, innovative solutions. We will leverage data-driven insights to help us grow our own brands and their own brands' profitability and to increase our e-commerce sales. We will also be offering new services through strategic partnerships that create the ecosystem of the future. All right, that's a summary of our five strategic priorities, the foundation of our operational plan. We're running Spartan Dash differently. As we look forward to 2022, we are tracking metrics across these initiatives to continually measure our success and keep ourselves accountable. Among these metrics, our 2022 key performance indicators will focus on associate retention, safety, outbound throughput, fill rate, and adjusted EBITDA. I'm excited about where we've been and where we're headed as a company. As we continue to execute, I believe we'll make Spartan Nash an investment that will yield meaningful long-term returns to all of our shareholders. With that, I'll turn it over to Jason to walk you through our financial performance in greater detail and provide you with our fiscal 2022 outlook. Jason?