Roundy's, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

Roundy's, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

Sales and Adjusted EBITDA Increased From Third to Fourth Quarter 2012

MILWAUKEE--(BUSINESS WIRE)-- Roundy's, Inc. ("Roundy's") (NYS: RNDY) , a leading grocer in the Midwest, today reported financial results for the fourth quarter and full year ended December 29, 2012.

Q4 2012

• Net sales increased 1.4% to $981.9 million

• Adjusted net income^*, which excludes the impact of a non-recurring pension withdrawal charge and a goodwill impairment charge, was $8.6 million, or $0.19 adjusted diluted earnings per common share, compared to $9.2 million, or $0.30 adjusted diluted earnings per common share in the prior year quarter

• Adjusted EBITDA^* was $46.6 million compared to $51.4 million in the same quarter last year (and compared to $43.1 million in the third quarter)

• $106.4 million after-tax, non-cash goodwill impairment charge incurred

Full Year 2012

• Net sales increased 1.3% to $3.89 billion

• Adjusted net income^*, which excludes the impact of non-recurring charges and a goodwill impairment charge, was $47.0 million, or $1.08 adjusted diluted earnings per common share, compared to $48.0 million, or $1.58 adjusted diluted earnings per common share in the prior year

• Adjusted EBITDA^* was $198.7 million compared to $224.2 million last year

"We're pleased with the progress we made on our customer-centric initiatives in the fourth quarter," said Robert Mariano, chairman, president and chief executive officer of Roundy's. "These initiatives continue to resonate with our customers as own brand penetration finished the year at a record 21.6% while our perishable sales mix for the quarter was 120 basis points higher than last year. Our team continues to focus on providing our customers with superior quality, service and selection to set us apart from our competition and better position us in the markets we serve."

Mr. Mariano continued, "I'm also pleased to report that our growth plan for Mariano's in the Chicago market is on track. The stores continue to exceed our expectations for both sales and profitability. We plan to open five additional Mariano's in the Chicago area in 2013, which will give us 13 stores in that market."

Mr. Mariano concluded, "We are encouraged by our sales trends to-date in 2013, but believe that our results in our core markets will continue to be impacted by a cautious consumer, as well as increased competitive unit growth and promotional activity. We remain intently focused on our strategy to deliver the best overall value and service to our customers and to use our cash flow to expand the Mariano's banner, pay down debt and deliver an attractive dividend to our shareholders."

^*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 Fourth Quarter of 2012

Net sales for the fourth quarter of 2012 were $981.9 million, an increase of $13.1 million, or 1.4%, from $968.7 million for the fourth quarter of 2011. The increase primarily reflects the benefit of new stores, partially offset by a 2.1% decrease in same-store sales. The decline in same-store sales was primarily due to a 3.5% decrease in the number of customer transactions, partially offset by a 1.5% increase in average transaction size. Same-store sales comparisons were negatively impacted by the increased effect of competitive store openings and the continuation of a challenging economic environment. In addition, same-store sales were negatively affected by a calendar shift that moved New Year's holiday related sales into the first quarter of 2013. Adjusted for the effect of the calendar shift, same-store sales declined 1.3%.

Gross profit for the fourth quarter of 2012 increased 2.1% to $259.5 million, from $254.1 million in the same period last year. Gross profit as a percentage of net sales was 26.4% for the fourth quarter of 2012, compared to 26.2% in the same period last year. The increase in gross profit as a percentage of net sales primarily reflects reduced LIFO expense and an increased perishable sales mix, partially offset by greater price and promotional investments in certain markets and increased shrink.

Operating and administrative expenses for the fourth quarter of 2012 increased to $232.3 million, from $223.1 in the same period last year. Operating and administrative expenses as a percentage of net sales increased to 23.7% in the fourth quarter of 2012, from 23.0% in the same period last year, due to increased occupancy costs related to new and replacement stores, a non-recurring pension withdrawal charge of $1.0 million, incremental costs related to being a public company and reduced labor and fixed cost leverage in the Company's core business resulting from lower same-store sales.

During the fourth quarter, the Company's market capitalization experienced a significant decline. As a result, management believed that there were circumstances evident which indicated that the fair value of the Company's reporting unit could be below its carrying amount. Management therefore updated its annual review of goodwill for impairment that had been completed in the third quarter, and concluded that the carrying amount of goodwill exceeded its estimated fair value, resulting in a pre-tax, non-cash goodwill impairment charge of $120.8 million ($106.4 million after-tax). The non-cash impairment charge will not affect the Company's liquidity, operating cash flows or compliance with debt covenants.

For the fourth quarter of 2012, adjusted net income was $8.6 million, or $0.19 adjusted diluted earnings per common share, compared to $9.2 million, or $0.30 adjusted diluted earnings per common share, for the fourth quarter of 2011. Adjusted net income for the fourth quarter of 2012 excludes a $106.4 million after-tax goodwill impairment charge, or $2.37 per diluted common share, and a $0.6 million after-tax charge, or $0.01 per diluted common share, for the non-recurring pension withdrawal charge, as discussed above. Reported net loss for the fourth quarter of 2012 was $98.4 million, or $2.19 loss per diluted common share.

Adjusted EBITDA for the fourth quarter of 2012 was $46.6 million, compared to $51.4 million in the fourth quarter of 2011. The decrease was primarily due to the effect of the continued challenging economic and competitive environment, which resulted in lower same-store sales, and reduced fixed cost leverage as well as additional costs associated with being a public company.

The Company opened one new store during the fourth quarter of 2012.

Net cash flows provided by operating activities for the fourth quarter 2012 was $57.4 million, compared to $55.0 million during the fourth quarter 2011.

The Company paid a dividend of $0.12 per share on all outstanding shares of its common stock during the fourth quarter. During the first 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 March 18, 2013 to stockholders of record as of March 11, 2013.

Financial Results for Fiscal 2012

Net sales were $3,890.5 million for the fifty-two weeks ended December 29, 2012, an increase of $48.5 million, or 1.3% from $3,842.0 million for the fifty-two weeks ended December 31, 2011. The increase primarily reflects the benefit of new stores, partially offset by a 2.8% decrease in same-store sales. The decline in same-store sales was due to a 2.6% decrease in the number of customer transactions and 0.1% decrease in the average transaction size. The Company's same-store sales were negatively impacted by the effect of competitive store openings during the last twelve months, as well as the continued challenging economic and promotional environment.

For the fifty-two weeks ended December 29, 2012 adjusted net income was $47.0 million, or $1.08 adjusted diluted earnings per common share, compared with $48.0 million, or $1.58 adjusted diluted earnings per common share for the fifty-two weeks ended December 31, 2011. Adjusted net income for the year excludes the $106.4 million after-tax goodwill impairment charge, or $2.44 per diluted common share, an $8.4 million after-tax charge, or $0.19 per diluted common share, for the early extinguishment of debt and one-time IPO expenses that occurred during the first quarter 2012, and other after-tax non-recurring charges of $1.4 million, or $0.03 per diluted common share. Reported net loss for the fifty-two weeks ended December 29, 2012 was $69.2 million, or $1.61 loss per diluted common share.

Adjusted EBITDA for the fifty-two weeks ended December 29, 2012 and December 31, 2011 was $198.7 million and $224.2 million, respectively.

Fiscal 2013 Guidance

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

(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, February 28, 2013 at 4:30 p.m. ET (3:30 p.m. CT) to discuss financial results for the fourth quarter fiscal 2012. To access the conference call, participants should dial (888) 790-3727; passcode is 5627188. 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 March 14, 2013. A telephone replay will be available through March 14, 2013 by calling (888) 296-6945 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 18,000 employees. Founded in Milwaukee in 1872, Roundy's operates 160 retail grocery stores and 98 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 Comprehensive 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.

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 and fifty-two weeks ended December 31, 2011 and December 29, 2012, respectively (in thousands):

⁽¹⁾Amounts in table may not foot due to rounding.
⁽²⁾The weighted average number of diluted common shares outstanding used to calculate adjusted diluted earnings per share for the fifty-two weeks ended December 29, 2012 includes 578,000 shares which were excluded from the weighted average number of diluted common shares outstanding used to calculate diluted loss per common share, as shares were anti-dilutive.

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 and fifty-two weeks ending December 31, 2011 and December 29, 2012, respectively (in thousands):