10-K 1 sptn-10k_20160102.htm 10-K sptn-10k_20160102.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

x

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended January 2, 2016.

OR

¨

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             .

Commission File Number: 000-31127

 

SPARTANNASH COMPANY

(Exact Name of Registrant as Specified in Its Charter)

 

 

Michigan

 

38-0593940

(State or Other Jurisdiction) of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

850 76th Street, S.W.

P.O. Box 8700

Grand Rapids, Michigan

 

49518-8700

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (616) 878-2000

Securities registered pursuant to Section 12(b) of the Securities Exchange Act:

 

Title of Class

 

Name of Exchange on which Registered

Common Stock, no par value

 

NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Securities Exchange Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requirement to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act).

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

¨

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates based on the last sales price of such stock on the NASDAQ Global Select Market on July 18, 2015 (which was the last trading day of the registrant’s second quarter in the fiscal year ended January 2, 2016) was $1,197,681,942.

The number of shares outstanding of the registrant’s Common Stock, no par value, as of February 26, 2016 was 37,285,140, all of one class.

DOCUMENTS INCORPORATED BY REFERENCE

 

Part III, Items 10, 11, 12, 13 and 14

  

Proxy Statement for Annual Meeting to be held June 2, 2016

 

 

 

 


Forward-Looking Statements

The matters discussed in this Annual Report on Form 10-K, in the Company’s press releases and in the Company’s website-accessible conference calls with analysts and investor presentations include “forward-looking statements” about the plans, strategies, objectives, goals or expectations of SpartanNash Company and subsidiaries (“SpartanNash” or “the Company”). These forward-looking statements are identifiable by words or phrases indicating that SpartanNash or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,” or that a particular occurrence or event “will,” “may,” “could,” “should” or “will likely” result, occur or be pursued or “continue” in the future, that the “outlook” or “trend” is toward a particular result or occurrence, that a development is an “opportunity,” “priority,” “strategy,” “focus,” that the Company is “positioned” for a particular result, or similarly stated expectations. Accounting estimates, such as those described under the heading “Critical Accounting Policies” in Item 7 of this Annual Report on Form 10-K, are inherently forward-looking. The Company’s asset impairment and restructuring cost provisions are estimates and actual costs may be more or less than these estimates and differences may be material. You should not place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report, other report, release, presentation, or statement.

In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission (“SEC”), there are many important factors that could cause actual results to differ materially.

The Company’s ability to achieve sales and earnings expectations; improve operating results; continue to realize benefits of the merger with Nash-Finch Company (including realization of synergies); maintain or strengthen retail-store performance; assimilate acquired distribution centers and stores; maintain or grow sales; respond successfully to competitors including remodels and new openings; maintain or improve gross margin; effectively address food cost or price inflation or deflation; maintain and improve customer and supplier relationships; realize expected synergies from merger and acquisition activity; realize expected benefits of restructuring; realize growth opportunities; maintain or expand its customer base; reduce operating costs; sell on favorable terms assets held for sale; generate cash; continue to meet the terms of the Company’s debt covenants; continue to pay dividends, and successfully implement and realize the expected benefits of the other programs, initiatives, systems, plans, priorities, strategies, objectives, goals or expectations described in this Annual Report, the Company’s other reports, press releases and public comments will be affected by changes in economic conditions generally or in the geographic areas that the Company serves, adverse effects of the changing food and distribution industries, adverse changes in government funded consumer assistance programs, possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action, changes in funding levels, or the effects of mandated reductions in or sequestration of government expenditures, and other factors including, but not limited to, those discussed in the “Risk Factors” discussion in Item 1A of this Annual Report.

 

This section and the discussions contained in Item 1A, “Risk Factors,” and in Item 7, subheading “Critical Accounting Policies” in this report, both of which are incorporated here by reference, are intended to provide meaningful cautionary statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect the Company’s expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to SpartanNash or that SpartanNash currently believes are immaterial also may impair its business, operations, liquidity, financial condition and prospects. The Company undertakes no obligation to update or revise its forward-looking statements to reflect developments that occur or information obtained after the date of this Annual Report.

 

 


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PART I

 

Item 1.Business

Overview

SpartanNash Company (together with its subsidiaries, “SpartanNash” or “the Company”) is a leading multi-regional grocery distributor and grocery retailer and the largest distributor, by revenue, of grocery products to military commissaries in the United States. The Company’s core businesses include distributing grocery products to military commissaries and exchanges and independent and corporate-owned retail stores primarily located in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, and Egypt. The Company operates three reportable business segments: Military, Food Distribution and Retail. For the fiscal year ended January 2, 2016, the Company generated net sales of approximately $7.7 billion.

Established in 1917 as a cooperative grocery distributor, Spartan Stores Inc. (“Spartan Stores”) converted to a for-profit business corporation in 1973. In January 1999, Spartan Stores began to acquire retail supermarkets in its focused geographic regions. In August 2000, Spartan Stores common stock became listed on the NASDAQ Stock Market under the symbol “SPTN.” On November 19, 2013, Spartan Stores merged with Nash-Finch Company (“Nash-Finch”). Nash-Finch’s core businesses include distributing food to military commissaries and independent grocery retailers and distributing to and operating corporate-owned retail stores. Following completion of the merger, the combined company is named SpartanNash Company. Unless the context otherwise requires, the use of the terms “SpartanNash,” “we,” “us,” “our” and “the Company” in this Annual Report on Form 10-K refers to the surviving corporation SpartanNash Company and, as applicable, its consolidated subsidiaries.

The Company’s hybrid business model supports the close functioning of its Military, Food Distribution, and Retail operations, optimizing the natural complements of each business segment while also enhancing the ability of the Company’s independent retailers to compete long term in the grocery industry. The model produces operational efficiencies, helps stimulate distribution product demand, and provides sharper visibility and broader business growth options. In addition, the Military, Food Distribution, and Retail diversification provides added flexibility to pursue the best long-term growth opportunities in each segment.

SpartanNash has established key management priorities for the longer-term strategy of the Company, including establishing a well-differentiated product offering for its Military, Food Distribution, and Retail segments, and additional strategies designed to create value for its shareholders, retailers and customers. These priorities are:

Military:

 

Leverage the size and scale of the existing Food Distribution and Retail segments to attract additional customers.

 

Continue to partner with Coastal Pacific Food Distributors, the second largest worldwide military distributor, by revenue, of food and related products to leverage the advantage of a worldwide distribution network.

Food Distribution:

 

Develop new solutions for customers.

 

Use retail competency and combined distribution platform capabilities to increase business within the existing account base and to potentially add new distribution categories and take advantage of current competitive dynamics to supply new customers.

 

Increase private brand penetration and overall purchase concentration.

 

Enhance the value-added offer to further meet the needs of customers.

Retail:

 

Evaluate banners to maintain a portfolio of customer-relevant offerings.

 

Drive a lean and efficient operating cost structure to remain competitive.

 

Rationalize store base to maximize capital efficiency and enhance profitability.

 

Deploy capital to modernize the existing store base.

 

Pursue opportunistic roll-ups of existing distribution customers and/or other retailers.

 

Expand consumer relationships with pharmacy, fuel and other promotional offerings.

-3-


Supply Chain:

 

Leverage new competitive position, scale and financial flexibility to further grow the distribution channel.

 

Gain efficiencies in all aspects of the supply chain through optimization of the distribution center network.

Military Segment

The Company’s Military segment contracts with manufacturers to distribute a wide variety of grocery products primarily to U.S. military commissaries and exchanges.

The distributed grocery products are delivered to 169 military commissaries and over 442 exchanges located in 37 states across the United States and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. The Company’s distribution centers are strategically located among the largest concentration of military bases in the areas the Company serves and near Atlantic ports used to ship grocery products to overseas commissaries and exchanges. The Company’s Military segment has an outstanding reputation as a distributor focused on U.S. military commissaries and exchanges, based in large measure on its excellent service metrics, which include fill rate, on-time delivery and shipping accuracy.

The Defense Commissary Agency (“DeCA”) operates a chain of commissaries on U.S. military installations throughout the world. DeCA contracts with manufacturers to obtain grocery and related products for the commissary system. Manufacturers either deliver the products to the commissaries themselves or, more commonly, contract with distributors such as SpartanNash to deliver the products. Manufacturers must authorize the distributors as their official representatives to DeCA, and the distributors must adhere to DeCA’s frequent delivery system procedures governing matters such as product identification, ordering and processing, information exchange and resolution of discrepancies. The Company obtains distribution contracts with manufacturers through competitive bidding processes and direct negotiations.

The Company has approximately 250 distribution contracts representing 600 manufacturers that supply products to the DeCA commissary system and various exchange systems. The larger contracts have definitive durations whereas the smaller contracts generally have an indefinite term, but may be terminated by either party without cause upon 30 days prior written notice to the other party. The contracts typically specify the commissaries and exchanges to supply on behalf of the manufacturer, the manufacturer’s products to be supplied, service and delivery requirements and pricing and payment terms. The Company’s ten largest manufacturer customers represented approximately 40% of the Company’s Military segment sales for the fiscal year ended January 2, 2016.

As commissaries need to be restocked, DeCA identifies the manufacturer with which an order is to be placed, determines which distributor is the manufacturer’s official representative for a particular commissary or exchange location, and then places a product order with that distributor under the auspices of DeCA’s master contract with the applicable manufacturer. The distributor selects that product from its existing inventory, delivers it to the commissary or commissaries designated by DeCA, and bills the manufacturer for the product shipped. The manufacturer then bills DeCA under the terms of its master contract. Overseas commissaries are serviced in a similar fashion, except that a distributor’s responsibility is to deliver products as and when needed to the port designated by DeCA, which in turn bears the responsibility for shipping the product to the applicable commissary or overseas warehouse.

After the Company ships a particular manufacturer’s products to commissaries in response to an order from DeCA, the Company invoices the manufacturer for the product price plus a service and/or drayage fee that is typically based on a percentage of the purchase price, but may in some cases be based on a dollar amount per case or pound of product sold. The Company’s order handling and invoicing activities are facilitated by procurement and billing systems developed specifically for the Military business, which addresses the unique aspects of its business, and provides the Company’s manufacturer customers with a web-based, interactive means of accessing critical order, inventory and delivery information.

Food Distribution Segment

The Company’s Food Distribution segment uses a multi-platform sales approach to distribute grocery products to independent retail locations and corporate-owned retail stores. Total net sales from the Company’s Food Distribution segment, including sales to corporate-owned retail stores that are eliminated in the consolidated financial statements, were approximately $4.3 billion for the fiscal year ended January 2, 2016. As of the end of fiscal 2015, the Company believes that it is the fifth largest wholesale distributor, by revenue, to supermarkets in the United States.

Customers. The Company’s Food Distribution segment supplies grocery products to a diverse group of independent grocery store operators ranging from a single store to supermarket chains with over 20 stores; and also supplies the Company’s corporate-owned retail stores. The Company operates in 47 states with 12 distribution centers supporting approximately 2,100 independently owned supermarkets and also supplies its 163 corporate-owned retail stores. This larger geographic reach allows for increased scale as the Company leverages the organization to enhance the ability of its independent retailers to compete long-term in the grocery industry.

-4-


The Company services a national retailer, Dollar General, through its Food Distribution segment. Sales are made to more than 13,000 retail locations for this customer, representing 10.7% of consolidated net sales in fiscal 2015. Sales to this customer did not exceed 10% of consolidated net sales for any other year presented. The Company’s Food Distribution customer base is diverse, and no other single customer exceeded 5% of consolidated net sales in any of the years presented.

The Company’s five largest Food Distribution customers (excluding corporate-owned retail stores) accounted for approximately 39% of total Food Distribution net sales for the fiscal year ended January 2, 2016. In addition, approximately 84% of Food Distribution net sales, including intercompany sales to corporate-owned retail stores, are covered under supply agreements with independent customers or are directly controlled by SpartanNash.

Products. The Company’s Food Distribution segment provides a selection of approximately 56,000 stock-keeping units (SKUs) of nationally branded and private label grocery products (see “Marketing and Merchandising – Private Brands”) and perishable food products, including dry groceries, produce, dairy products, meat, delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care products and pharmacy. These product offerings, along with best in class services, allow independent retailers the opportunity to support their entire operations with a single supplier. Meeting consumers’ needs will continue to be SpartanNash’s mission as it executes its hybrid business model of wholesale, retail and military supply.

Additional Services. The Company offers and provides many of its independent Food Distribution customers with value-added services, including:

 

●   Site identification and market analysis

  

●   Coupon redemption

●   Store planning and development

  

●   Product reclamation

●   Marketing, promotion and advertising

  

●   Graphic services

●   Website design, technology and information services

  

●   Category management

●   Accounting, payroll and tax preparation

  

●   Real estate services

●   Human resource services

  

●   Construction management services

●   Fuel technology

  

●   Pharmacy retail and procurement services

●   Account management field sales support

  

●   Retail pricing

●   InSite Business to Business communications

  

●   Security consulting and investigation services

Retail Segment

The Company’s neighborhood market strategy distinguishes its corporate-owned retail stores from supercenters and limited assortment stores by emphasizing convenient locations, demographically-targeted merchandise selections, high-quality fresh offerings, customer service, value pricing and community involvement.

The Company’s Retail segment operates 163 corporate-owned retail stores in the Midwest and Great Lakes which operate primarily under the banners of Family Fare Supermarkets, Family Fresh Markets, D&W Fresh Markets, and Sun Mart. Retail banners and numbers of stores are more fully detailed in Item 2, “Properties,” of this report.

The Company’s corporate-owned retail stores offer nationally branded and private label grocery products (see “Marketing and Merchandising – Private Brands”) and perishable food products including dry groceries, produce, dairy products, meat, delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products and health and beauty care products. The private label grocery products provide enhanced retail margins and are believed to help improve customer loyalty. The Company also offers pharmacy services in 91 of its corporate-owned retail stores. The Company’s corporate-owned retail stores range in size from approximately 10,400 to 92,381 total square feet, or on average, approximately 41,300 total square feet per store.

The Company operates 29 fuel centers primarily at its supermarket locations operating under the banners Family Fare Quick Stop, D&W Quick Stop, VG’s Quick Stop, Forest Hills Quick Stop and Sun Mart Express Fuel. These fuel centers offer refueling facilities and in the adjacent convenience store, a limited variety of popular consumable products. The Company’s prototypical Quick Stop stores are approximately 1,100 square feet in size. The Company has experienced increased supermarket sales upon opening fuel centers and initiating cross-merchandising activities. The Company plans, as opportunities arise, to open additional fuel centers at certain of its supermarket locations over the next few years.

-5-


The Company’s corporate-owned retail stores are primarily the result of acquisitions from January 1999 to June 2015, including the merger with Nash-Finch in November 2013. The following chart details the changes in the number of corporate-owned retail stores over the last five fiscal years, including the transition year ended December 28, 2013:

 

 

March 31,

 

 

March 30,

 

 

December 28,

 

 

January 3,

 

 

January 2,

 

 

2012

 

 

2013

 

 

2013

 

 

2015

 

 

2016

 

Number of stores at beginning of year

 

97

 

 

 

96

 

 

 

101

 

 

 

172

 

 

 

162

 

Stores acquired or added during year

 

 

 

 

5

 

 

 

78

 

 

 

1

 

 

 

7

 

Stores closed or sold during year

 

1

 

 

 

 

 

 

7

 

 

 

11

 

 

 

6

 

Number of stores at end of year

 

96

 

 

 

101

 

 

 

172

 

 

 

162

 

 

 

163

 

During the fiscal year ended January 2, 2016, the Company opened one new retail store in Dickinson, North Dakota, acquired six stores in Bismarck and Mandan, North Dakota, completed seven major remodels, and completed many other limited remodels. The Company also converted six corporate-owned retail stores to the Family Fare banner.

 

The Company expects to continue making progress with its capital investment program during fiscal 2016 by completing 13 major remodels, and by opening additional fuel centers or entering into partnerships with existing fuel operations. The Company will continue to evaluate its store base and may close three or four stores during the course of 2016. The Company evaluates proposed projects based on demographics and competition within each geographic area, and prioritizes projects based on their expected returns on investment. Approval of proposed capital projects requires a projected internal rate of return that meets or exceeds the Company’s policy; however, the Company may undertake projects that do not meet this standard to the extent they represent required maintenance or necessary infrastructure improvements. In addition, the Company performs a post completion review of financial results versus its expectation on all major projects. The Company believes that focusing on such measures provides it with an appropriate level of discipline in its capital expenditures process.

Supply Chain Network

The Company has integrated its supply chain organization to further optimize the network, increase asset utilization and leverage programs that will drive more value for its shareholders, retailers and customers. The Company believes its distribution facilities are strategically located to efficiently serve current customers and also have the available capacity to support future growth. The Company continually evaluates inventory movement and assigns SKUs to appropriate areas within its distribution facilities to reduce the time required to stock and pick products and to achieve additional efficiencies.

The Company has several projects planned for the fiscal year ending December 31, 2016. These projects are designed to further integrate the Company’s supply chain capabilities across distribution centers and thereby increase efficiency of both inbound and outbound distribution operations. To demonstrate the Company’s commitment across the entire network, the Company has invested in uniformly branding all tractors with a new logo that embodies the Company’s tagline, “Taking Food Places.” Newly purchased trailers will also receive the new logo layout. Over the next two years, the Company plans to re-logo all existing trailers within the SpartanNash supply chain. This will allow the Company to increase asset utilization by sharing resources across all facility locations.

Supply Chain Functions. The Company’s distribution network is comprised of 19 distribution centers, 7 of which primarily service the Military segment and 12 of which service the Food Distribution segment, with approximately 9.1 million total square feet of warehouse space.

The Company operates a fleet of approximately 490 over-the-road tractors, 575 dry vans, and 960 refrigerated trailers. Through routing optimization systems, the Company carefully manages the millions of miles its fleet drives annually servicing its military commissaries, exchanges, independent retailers, national account locations and corporate-owned supermarkets. The Company has also equipped some of its refrigerated trailers with a refrigeration unit that has the capability to run on electric standby, offering an economical and environmentally friendly alternative to diesel fuel. The Company remains committed to the ongoing investment required to maintain a best in class fleet while focusing on low cost, environmentally friendly solutions.

Products

The Company offers a wide variety of grocery products, general merchandise and health and beauty care, pharmacy, fuel and other items and services. The consolidated net sales include the net sales of its Military segment, corporate-owned stores and fuel centers in its Retail segment and the net sales of its Food Distribution business, which excludes sales to affiliated stores.

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The following table presents sales by type of similar product and services:

 

 

January 2, 2016

 

January 3, 2015

 

December 28, 2013

(In thousands, except percentages)

(52 Weeks)

 

(53 Weeks)

 

(39 Weeks)

Non-perishables (1)

$

 

4,845,763

 

 

 

63.3

 

%

 

$

 

4,998,895

 

 

 

63.1

 

%

 

$

 

1,393,157

 

 

 

53.6

 

%

Perishables (2)

 

 

2,373,829

 

 

 

31.0

 

 

 

 

 

2,449,562

 

 

 

31.0

 

 

 

 

 

894,783

 

 

 

34.5

 

 

Pharmacy

 

 

310,377

 

 

 

4.1

 

 

 

 

 

289,494

 

 

 

3.7

 

 

 

 

 

163,659

 

 

 

6.3

 

 

Fuel

 

 

122,004

 

 

 

1.6

 

 

 

 

 

178,111

 

 

 

2.2

 

 

 

 

 

145,631

 

 

 

5.6

 

 

Consolidated net sales

$

 

7,651,973

 

 

 

100.0

 

%

 

$

 

7,916,062

 

 

 

100.0

 

%

 

$

 

2,597,230

 

 

 

100.0

 

%

(1)

Consists primarily of general merchandise, grocery, beverages, snacks and frozen foods.

(2)

Consists primarily of produce, dairy, meat, bakery, deli, floral and seafood.

Reporting Segment Financial Data

More detailed information about the Company’s reporting segments can be found in Note 16 to the consolidated financial statements included in Item 8, which is herein incorporated by reference. All of the Company’s sales and assets are in the United States of America.

Discontinued Operations

Certain of the Company’s Retail and Food Distribution operations have been recorded as discontinued operations. Discontinued operations consist of certain locations that have been closed or sold. Additional information may be found in Note 1 to the consolidated financial statements included in Item 8, which is herein incorporated by reference.

Marketing and Merchandising

General. The Company continues to align its marketing and merchandising strategies with current consumer behaviors by delivering initiatives centered on personalization, a multi-channel experience, value beyond price, and health and wellness. These strategies seek to use consumer data and insights to deliver products, promotions, content and experiences to satisfy the consumer’s needs.

The Company believes that its “yes Rewards” loyalty program gives it competitive insight into consumer behavior. This gives the Company the flexibility to adapt to rapidly changing conditions by making tactical and more effective adjustments to its marketing and merchandising programs. In fiscal 2015, the Company expanded its yes Rewards program to certain Family Fare and Family Fresh Markets stores in the western geographic areas and also provided a digital coupon program to its independent retailers.  

The Company’s investment to further strengthen its knowledge of the consumer has resulted in progress in several areas: robust self-serve data tool that enables it to make consumer centric merchandising and marketing decisions; the development of a customer strategy that will be used to guide its internal business processes and go-to market strategy; and the evolution of its customer segmentation that takes it beyond the purchase and transactional behavior to lifestyle. These accomplishments are building blocks and will ultimately enable the Company to provide a shopping experience that better meets the changing needs of the consumer.  

Through its numerous strategic partnerships, the Company is able to develop its enterprise approach to customer centricity; benefiting both its Retail and Food Distribution businesses. By harnessing its proprietary data, the Company is able to provide a set of tools and capabilities for the organization that enables the Company to provide its customers with a more relevant and personalized shopping experience. This effort also enables the Company to continue to learn more about its best customers; develop strategies to enable long-term customer and supplier loyalty; deploy a more effective and efficient marketing spend; and ultimately make better business decisions.

The Company has been building tools and capabilities to enable relevant, personalized content across its marketing channels and focusing on expanding its digital, social and mobile capabilities. The Company also implemented a number of capabilities that enables it to more effectively target consumers and more efficiently develop and execute campaigns. This will help the Company to further build longer-term customer loyalty, maintain efficient marketing spend and increase return on investment, improve its sales growth opportunities, and further strengthen its business position. As the Company continues to build these capabilities, along with its other strategies, the Company will continue to share its marketing and merchandising learnings and best practices across its wholesale customer base.  

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The Company also believes it can differentiate itself from its competitors by offering a full set of services, from value added services in its Food Distribution segment to the inclusion of fuel centers and Starbucks Coffee or Caribou Coffee shops in some of its corporate-owned retail stores. The Company also provides consumers with discounts on fuel purchases at its fuel centers. In 2015, the Company began offering fuel programs in the western geographic areas by partnering with third party fuel centers. In addition, the Company also refined its fuel promotions and executed several pilots to further enhance its program and provide value to the customer.

The Company offers pharmacy services in 91 of its supermarkets and operates three free-standing pharmacy locations. The Company believes the pharmacy service offering in its supermarkets is an important part of the consumer experience. In its Michigan pharmacies, the Company offers free medications (antibiotics, diabetic medications and pre-natal vitamins) along with generic drugs for $4 and $10, and food solutions for preventative health and education for its customers. The Company has recently expanded these programs to a number of corporate-owned retail stores that have pharmacies in Minnesota and Nebraska.

As consumers increasingly emphasize health and wellness, the Company believes that it can be a provider and resource for products and services that will support their needs. In 2015, the Company continued to expand its offerings and partnerships and undertook the following key initiatives. First, the Company continued to expand its “Living Well” concept through store-within-a-store concepts and expanded product offerings. Second, the Company established partnerships with health systems and providers to provide dietician-led store tours to help educate consumers to make healthier food choices. Third, the Company increased its retail product offering and assortment for gluten-free, meat-free, non-GMO products and other health and wellness options. The Company is also proud to work with local farmers and vendors to provide locally grown produce and products in many stores.  

Private Brands. SpartanNash currently markets and distributes over 7,100 total private brand items primarily under the following labels: Spartan and Our Family; Top Care (health and beauty care); Tippy Toes (baby); Full Circle (organic and wellness); B-leve (premium bath and beauty); PAWS Premium (pet supplies); and Valu Time (value). The Company believes that its private brand offerings are part of its most valuable strategic assets, demonstrated through customer loyalty and profitability.

The Company has worked to develop a best in class private brand program. The Company has added more than 1,000 total corporate brand products to its consumer offerings in the past year, and as a result of realigning its private brand program to reduce the number of duplicative product offerings, the Company plans to introduce approximately 500 new total items in fiscal 2016 to round out its portfolio. The Company’s products have been frequently recognized for excellence in packaging design and product development. These awards underscore the Company’s continued commitment to providing the consumer with quality products at exceptional value. The Company’s focus is and will continue to be the pursuit of new opportunities and expansion of private brand offerings to its customers.

Competition

The Company’s Military, Food Distribution and Retail segments operate in highly competitive geographic areas, which typically result in low profit margins for the industry as a whole. The Company competes with, among others, regional and national grocery distributors, large chain stores that have integrated wholesale and retail operations, mass merchandisers, e-commerce providers, limited assortment stores and wholesale membership clubs, many of whom have greater resources than the Company.

The Company is one of five distributors in the United States with annual sales to the DeCA commissary system in excess of $100 million that distributes products via the frequent delivery system. The remaining distributors that supply DeCA tend to be smaller, regional and local providers. In addition, manufacturers contract with others to deliver certain products, such as baking supplies, produce, deli items, soft drinks and snack items, directly to DeCA commissaries and service exchanges. Because of the narrow margins in this industry, it is of critical importance for distributors to achieve economies of scale, which is typically a function of the density or concentration of military bases within the geographic area(s) a distributor serves. As a result, no single distributor in this industry, by itself, has a nationwide presence. Rather, distributors tend to concentrate on specific regions, or areas within specific regions, where they can achieve critical mass and utilize warehouse and distribution facilities efficiently. In addition, distributors that operate larger non-military specific distribution businesses tend to compete for DeCA commissary business in areas where such business would enable them to more efficiently utilize the capacity of their existing distribution centers. The Company believes the principal competitive factors among distributors within this industry are customer service, price, operating efficiencies, reputation with DeCA and location of distribution centers. The Company believes its competitive position is very strong with respect to all of these factors within the geographic areas where it competes.

The primary competitive factors in the Food Distribution business include price, service, product quality, variety and other value-added services. The Company believes its overall service level, which is defined as actual units shipped divided by actual units ordered, is among industry leaders in terms of performance.

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The principal competitive factors in the retail grocery business include the location and image of the store; the price, quality and variety of the perishable products; and the quality and consistency of service. The Company believes it has developed and implemented strategies and processes that allow it to be competitive in its Retail segment. The Company monitors planned competitor store openings and uses established proactive strategies to respond to new competition both before and after the competitive store opening. Strategies to react to competition vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing and sales focus. During the past three fiscal years, 13 competitor supercenters opened in geographic areas in which the Company currently operates corporate-owned retail stores with two additional openings expected to occur during fiscal 2016. As a result of these openings, the Company believes the majority of its supermarkets compete with one or more supercenters.

Seasonality

Many northern Michigan stores are dependent on tourism and therefore, are most affected by seasons and weather patterns, including, but not limited to, the amount and timing of snowfall during the winter months and the range of temperature during the summer months. The Company’s first quarter consists of 16 weeks and will usually include the Easter holiday while all other quarters consist of 12 weeks each with the fourth quarter including the Thanksgiving and Christmas holidays. Fiscal year ended January 3, 2015 contained 53 weeks; therefore, the fourth quarter of fiscal 2014 consisted of 13 weeks rather than 12 weeks. The transition fiscal year ended December 28, 2013 consisted of 39 weeks; therefore, the third and final quarter of the short year consisted of 15 weeks rather than 16 weeks.

Suppliers

The Company purchases products from a large number of national, regional and local suppliers of name brand and private brand merchandise. The Company has not encountered any material difficulty in procuring or maintaining an adequate level of products to serve its customers. No single supplier accounts for more than 5% of the Company’s purchases. The Company continues to develop strategic relationships with key suppliers and believes this will prove valuable in the development of enhanced promotional programs and consumer value perceptions.

Intellectual Property

The Company owns valuable intellectual property, including trademarks and other proprietary information, some of which are of material importance to its business.

Technology

The Company’s information technology (“IT”) organization continues to integrate systems from the two merged companies. The plan is to consolidate onto a single set of systems. The integration has proceeded well and is approximately 60% complete. The integration will continue into fiscal 2017. During the last year there were additional projects completed which were unrelated to the integration of the two companies.

Supply Chain. During fiscal 2015, the Company continued to combine its Master Data Management systems to standardize customer, vendor and item information. The vendor portion is complete and the customer and item integration is still in process and will be completed in fiscal 2016. The Company completed the consolidation of the procurement system and the standardization of the transportation maintenance management system in fiscal 2015. The Company completed 80% of its redesign and upgrade for the communications technology in support of the distribution center network. In the non-integration area, the Company completed a number of supply chain enhancement projects to support its Food Distribution business.

Retail Systems. During fiscal 2015, the Company substantially completed the standardization of the legacy Nash-Finch retail locations with the Company’s standard point-of-sale (“POS”) and in store systems. The price modeling system was upgraded to support the addition of the legacy Nash-Finch retail stores. The Company also installed a new version of its loyalty systems in many of the remodeled legacy Nash-Finch retail locations. The Company continued with a multi-year customization effort for the major upgrade of its POS software. In the non-integration projects, the Company deployed major upgrades to its consumer digital properties including kiosks, web sites and mobile applications.

Administrative Systems. During fiscal 2015, the Company completed the consolidation onto a single accounts payable system and its related workflow system. The first phase of a financial reporting and planning system was installed in fiscal 2015. The Company completed the consolidation onto a single internal web based communication and workflow system during fiscal 2015. The Company is 90% complete with the consolidation onto a single electronic data interface (“EDI”) system.

Information Technology Infrastructure. The data center consolidation project (from four data centers to two data centers) began in fiscal 2015 and is now 70% complete and is expected to finish during the summer of fiscal 2016. In conjunction with this consolidation, the Company implemented major upgrades to its high performance processing and primary storage systems.

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Associates

As of January 2, 2016, the Company employed approximately 15,200 associates, 8,500 of which are on a full-time basis and 6,700 of which are part-time. Approximately 1,300 associates, or 9%, were represented by unions under collective bargaining agreements that will expire between April 2016 and October 2017 and consisted primarily of warehouse personnel and drivers at the Company’s Michigan, Ohio and Indiana distribution centers. The Company considers its relations with its union and non-union associates to be good and have not had any material work stoppages in over twenty years.

Regulation

The Company is subject to federal, state and local laws and regulations concerning the conduct of its business, including those pertaining to the workforce and the purchase, handling, sale and transportation of its products. Several of the Company’s products are subject to federal Food and Drug Administration (“FDA”) regulation. The Company believes that it is in substantial compliance in all material respects with the FDA and other federal, state and local laws and regulations governing its businesses.

Forward-Looking Statements

The matters discussed in this Item 1 include forward-looking statements. See “Forward-Looking Statements” at the beginning of this Annual Report on Form 10-K.

Available Information

The address of SpartanNash web site is www.spartannash.com. The inclusion of the Company’s website address in this Form 10-K does not include or incorporate by reference the information on or accessible through the Company’s website, and the information contained on or accessible through those websites should not be considered as part of this Form 10-K. The Company makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports (and amendments to those reports) filed or furnished pursuant to Section 13(a) of the Securities Exchange Act available on the Company’s web site as soon as reasonably practicable after the Company electronically files or furnishes such materials with the SEC. Interested persons can view such materials without charge by clicking on “For Investors” and then “SEC Filings” on the Company’s web site. SpartanNash is a “large accelerated filer” within the meaning of Rule 12b-2 under the Securities Exchange Act.

 

 

Item 1A.Risk Factors

The Company faces many risks. If any of the events or circumstances described in the following risk factors occur, the Company’s financial condition or results of operations may suffer, and the trading price of the Company’s common stock could decline. This discussion of risk factors should be read in conjunction with the other information in this Annual Report on Form 10-K. All of these forward-looking statements are affected by the risk factors discussed in this item and this discussion of risk factors should be read in conjunction with the discussion of forward-looking statements, which appears at the beginning of this report.

Business and Operational Risks

The Company operates in an extremely competitive industry. Many of its competitors are much larger than the Company and may be able to compete more effectively.

The Military segment faces competition from large national and regional food distributors as well as smaller distributors. Due to the narrow margins in the military food distribution industry, it is of critical importance for distributors to achieve economies of scale, which are typically a function of the density or concentration of military bases in the geographic area(s) a distributor serves and a distributor’s share of that geographic area. As a result, no single distributor in this industry, by itself, has a nationwide presence.

The Company’s Food Distribution and Retail segments compete with, among others, regional and national grocery distributors, large chain stores that have integrated wholesale and retail operations, mass merchandisers, e-Commerce providers, limited assortment stores and wholesale membership clubs, many of which have greater resources than the Company. Some of the distribution and retail competitors are substantially larger and have greater financial resources and advantages than the Company, intensifying competition at the wholesale and retail levels.

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The effects of industry consolidation and the expansion of alternative store formats have resulted in, and continue to result in, market share losses for traditional grocery stores. In addition, the Company is facing increasing competition from nontraditional competitors and in alternative sales channels, including e-commerce. These trends have produced even stronger competition for the Company’s Retail business and for the independent customers of the Company’s Food Distribution business. To the extent the Company’s independent customers are acquired by one of the Company’s competitors or are not successful in competing with other retail chains and non-traditional competitors, sales by the Company’s Food Distribution business will be affected. If the Company fails to implement strategies to respond effectively to these competitive pressures, its operating results could be adversely affected by price reductions, decreased sales or margins, or loss of customer base.

This competition may result in reduced profit margins and other harmful effects on the Company and the Food Distribution customers that the Company supplies. Ongoing industry consolidation could result in loss of the Company’s existing customers and could confront its retail operations with competition from larger and better-capitalized chains in existing or new geographic areas. The Company may not be able to compete successfully in this environment.

The Company’s businesses could be negatively affected if it fails to retain existing customers or attract a significant number of new customers.

Growing and increasing the profitability of the Company’s distribution businesses is dependent in large measure upon its ability to retain existing customers and capture additional distribution customers through its existing network of distribution centers, which enables the Company to more effectively utilize the fixed assets in those businesses. The Company’s ability to achieve these goals is dependent, in part, upon its ability to continue to provide a high level of customer service, offer competitive products at low prices, maintain high levels of productivity and efficiency, particularly in the process of integrating new customers into its distribution system, and offer marketing, merchandising and ancillary services that provide value to its independent customers. If the Company is unable to execute these tasks effectively, it may not be able to attract a significant number of new customers, and attrition among its existing customer base could increase, either or both of which could have an adverse impact on the Company’s revenue and profitability.

Growing and increasing the profitability of the Company’s Retail business is dependent upon increasing its customer base in the communities where the Company’s corporate-owned retail stores are located. The Company plans to invest in redesigning some of its corporate-owned retail stores into other formats in order to attract new customers. The Company’s results of operations may be adversely impacted if it is unable to attract a significant number of new retail customers.

The Company may not be able to implement its strategy of growth through acquisitions.

Part of the Company’s growth strategy involves selected acquisitions of additional retail grocery stores, grocery store chains or distribution facilities. Because the Company operates in the Food Distribution business, future acquisitions of retail grocery stores could result in the Company competing with its independent grocery store customers and could adversely affect existing business relationships with those customers. As a result, the Company may not be able to identify suitable acquisition candidates in the future, complete acquisitions or obtain the necessary financing. Accordingly, the Company may not be able to implement this part of its growth strategy or achieve expected results and long-term business goals as the success of its acquisitions will depend, in part, on whether the Company achieves the business synergies and anticipated cost savings in connection with these transactions and any future acquisitions.

Substantial operating losses may occur if the customers to whom the Company extends credit or for whom the Company guarantees loans or lease obligations fail to repay the Company.

In the ordinary course of business, the Company extends credit, including loans, to its Food Distribution customers, and provides financial assistance to some customers by guaranteeing their loan or lease obligations. The Company also leases store sites for sublease to independent retailers. Generally, the Company’s loans and other financial accommodations are extended to small businesses that are unrelated and may have limited access to conventional financing. The Company also subleases retail properties and assigns retail property leases to third parties in the ordinary course of business. While the Company seeks to obtain security interest and other credit support in connection with the financial accommodations the Company extends, such collateral may not be sufficient to cover its exposure. Greater than expected losses from existing or future credit extensions, loans, guarantee commitments or sublease arrangements could negatively and potentially materially impact the Company’s operating results and financial condition.

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Changes in relationships with the Company’s vendor base may adversely affect its business, margins, and profitability.

The Company sources the products it sells from a wide variety of vendors. The Company generally does not have long-term written contracts with its major suppliers that would require them to continue supplying it with merchandise. The Company depends on its vendors for, among other things, appropriate allocation of merchandise, assortments of products, operation of vendor-focused shopping experiences within its stores, and funding for various forms of promotional allowances. There has been significant consolidation in the food industry, and this consolidation may continue to the Company’s commercial disadvantage. Such changes could have a material adverse impact on the Company’s revenues and profitability. The Company cooperatively engages in a variety of promotional programs with its vendors. The Company manages these programs to maintain or improve margins and increase sales. A reduction or change in promotional spending could have a significant impact on profitability.

The Company depends heavily on its ability to purchase merchandise in sufficient quantities at competitive prices. The Company has no assurances of continued supply, pricing, or access to new products and any vendor could at any time change the terms upon which it sells to the Company or discontinue selling to the Company. Vendor supplies can be adversely affected by weather, food contamination, regulatory actions, labor supply, strikes, labor unrest or product vendor defaults or disputes that limit the Company’s ability to procure products for sale to customers.

Disruptions to the Company’s information technology systems, including security breaches and cyber-attacks, could negatively affect the Company’s business.

The Company has large, complex IT systems that are important to its business operations. The Company could incur significant losses due to disruptions in its systems and business if it were to experience difficulties accessing data stored in its IT systems.

The Company gathers and stores sensitive information, including personal information about its customers and associates as well as proprietary information of its customers and vendors. Although the Company has implemented security programs and disaster recovery facilities and procedures, security could be compromised and systems disruptions, data theft or other criminal activity could occur. This could result in a loss of sales or profits or cause the Company to incur significant costs to restore its systems or to reimburse third parties for damages.

As a merchant that accepts debit and credit cards for payment, the Company is subject to the Payment Card Industry (“PCI”) Data Security Standard (“DSS”), issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to the Company’s security involving the physical and electronic storage, processing and transmission of individual cardholder data. By accepting debit cards for payment, the Company is also subject to compliance with American National Standards Institute data encryption standards, and payment network security operating guidelines. Despite the Company’s compliance with these standards and other information security measures, the Company cannot be certain that all of its IT systems are able to prevent, contain or detect any cyber-attacks or security breaches from known malware or malware that may be developed in the future. To the extent that any disruption results in the loss, damage or misappropriation of information, the Company may be adversely affected by claims from customers, financial institutions, regulatory authorities, payment card associations and others. In addition, the cost of complying with stricter privacy and information security laws and standards could be significant to the Company.

Threats to security or the occurrence of severe weather conditions, natural disasters or health pandemics could harm the Company’s business.

The Company’s business could be severely impacted by wartime activities, threats or acts of terrorism, severe weather conditions, natural disasters, or widespread health pandemics. Any of these events could affect the transportation infrastructure used by both the Company and its vendors to supply the Company’s warehouses, corporate-owned retail stores, and Military and Food Distribution customers. While the Company believes it has adopted commercially reasonable precautions, insurance programs, and contingency plans; the destruction of, or substantial damage to, its distribution centers and corporate-owned retail stores due to natural disaster, severe weather conditions, accident, terrorism, or other causes could substantially compromise the Company’s ability to distribute products or generate sales at its corporate-owned retail stores. Additionally, unseasonably adverse climatic conditions that impact growing conditions and the crops of food producers could also adversely affect the availability or cost of certain products. Any of the above events could result in a loss of sales, profits and asset value.

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Impairment charges for goodwill or other intangible assets could adversely affect the Company’s financial condition and results of operations.

The Company is required to perform an annual impairment test for goodwill and indefinite-lived intangible assets in the fourth quarter of each year, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. Testing goodwill and other intangible assets for impairment requires management to make significant estimates about the Company’s future performance, cash flows, and other assumptions that can be affected by potential changes in economic, industry or market conditions, business operations, competition, or the Company’s stock price and market capitalization. Changes in these factors, or changes in actual performance compared with estimates of the Company’s future performance, may affect the fair value of goodwill or other intangible assets. This could result in the Company recording a non-cash impairment charge for the difference between the carrying value and implied fair value of the goodwill or other intangible assets in the period the determination of impairment is made. The Company cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible assets become impaired, the Company’s financial condition and results of operations may be adversely affected.

The Company may be unable to successfully integrate the businesses of Spartan Stores and Nash-Finch and realize the anticipated benefits of the merger.

The merger involved the combination of two companies that formerly operated as independent public companies. The combined Company continues to devote significant management attention and resources to integrating the business practices and operations of Spartan Stores and Nash-Finch. The combined company may encounter complexities associated with managing the businesses of the combined company, in a seamless manner that minimizes adverse effects on customers, suppliers, associates and other constituencies. The Company’s future success depends, in part, upon its ability to address challenges related to the management and monitoring of the integrated operations of Nash-Finch and Spartan Stores and associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

The Company is expected to incur substantial expenses related to the continued integration of Spartan Stores and Nash-Finch.

The Company continues to incur substantial expenses in connection with the integration of Spartan Stores and Nash-Finch. There are a large number of processes, policies, procedures, operations, technologies and systems that have been or will be integrated. The Company continues to maintain an administrative presence in Grand Rapids, Michigan; Minneapolis, Minnesota; and Norfolk, Virginia. There are many factors beyond its control that could affect the total amount or the timing of the integration expenses. Many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses may continue to result in the combined company taking charges against earnings and the amount and exact timing of such charges are somewhat uncertain.

Restrictive covenants imposed by the Company’s credit facility and other factors could adversely affect the Company’s ability to borrow.

The Company’s ability to borrow additional funds is governed by the terms of its credit facilities. The credit facilities contain financial and other covenants that, among other things, limit the Company’s ability to draw down the full amount of the facility, incur additional debt outside of the credit facility, create new liens on property, make acquisitions, or pay dividends. These covenants may affect the Company’s operating flexibility and may require it to seek the consent of the lenders to certain transactions that the Company may wish to effect. The Company is not currently restricted by these covenants. Disruptions in the financial markets have in the past resulted in bank failures. One or more of the participants in the credit facility could become unable to fund the Company’s future borrowings when needed. The Company believes that cash generated from operating activities and available borrowings under the credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, dividend payments and debt service obligations for the foreseeable future. However, there can be no assurance that the business will continue to generate cash flow at or above current levels or that the Company will maintain its ability to borrow under its credit facility. The Company may not be able to refinance its existing debt at similar terms.

Maintaining the Company’s reputation and corporate image is essential to the Company’s business success.

The Company’s success depends on the value and strength of its corporate name and reputation. The Company’s name, reputation and image are integral to its business as well as to the implementation of its strategies for expanding its business. The Company’s business prospects, financial condition and results of operations could be adversely affected if its public image or reputation were to be tarnished by negative publicity including dissemination via print, broadcast or social media, or other forms of Internet-based communications. Adverse publicity about regulatory or legal action against the Company could damage its reputation and image, undermine its customers’ confidence and reduce long-term demand for its products and services, even if the regulatory or legal action is unfounded or not material to its operations. Any of these events could have a negative impact on the Company’s results of operations and financial condition.

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The Company may be unable to retain its key management personnel.

The Company’s success depends to a significant degree upon the continued contributions of senior management. The loss of any key member of the Company’s management team may prevent it from implementing its business plans in a timely manner. The Company cannot assure that successors of comparable ability will be identified and appointed and that the Company’s business will not be adversely affected.

Market Risks

The Company’s business is subject to risks from regional economic conditions, fuel prices, and other factors in its geographic areas.

The Company’s business is sensitive to changes in general economic conditions. In recent years, the United States has experienced volatility in the economy and financial markets due to uncertainties related to energy prices, availability of credit, difficulties in the banking and financial services sector, the decline in the housing market, diminished market liquidity, falling consumer confidence and high unemployment rates. These adverse economic conditions in its geographic areas, potential reduction in the populations in its geographic areas and the loss of purchasing power by residents in its geographic areas could reduce the amount and mix of groceries purchased, could cause consumers to trade down to less expensive mix of products or to trade down to discounters, all of which may affect the Company’s revenues and profitability.

Gasoline prices may affect consumer behavior and retail grocery prices. If petroleum prices rise in the future it may prompt consumers to make different choices in how and where they shop due to the high price of gasoline. Additionally, the impact of higher fuel costs is passed through by manufacturers and distributors in the prices of goods and services provided, again potentially affecting consumer buying decisions. This could have adverse impacts on retail store traffic, basket size and overall spending at both its corporate-owned and independent retail grocery stores.

In addition, many of the Company’s corporate-owned retail stores, as well as stores operated by its Food Distribution customers, are located in areas that are heavily dependent upon tourism. Unseasonable weather conditions and the economic conditions discussed above may decrease tourism activity and could result in decreased sales by the Company’s corporate-owned retail stores and decreased sales to stores operated by its Food Distribution customers, adversely affecting the Company’s revenues and profitability.

Economic downturns and uncertainty have adversely affected overall demand and intensified price competition, and have caused consumers to “trade down” by purchasing lower margin items and to make fewer purchases in traditional supermarket channels. Continued negative economic conditions affecting disposable consumer income such as employment levels, business conditions, changes in housing market conditions, increases in the cost of healthcare coverage, the availability of credit, interest rates, volatility in fuel and energy costs, food price inflation or deflation, employment trends in its geographic areas and labor costs, the impact of natural disasters or acts of terrorism, and other matters affecting consumer spending could cause consumers to continue shifting even more of their spending to lower-priced products and competitors. The continued general reductions in the level of discretionary spending or shifts in consumer discretionary spending to the Company’s competitors could adversely affect the Company’s growth and profitability.

Disruptions to worldwide financial and credit markets could potentially reduce the availability of liquidity and credit generally necessary to fund a continuation and expansion of global economic activity. A shortage of liquidity and credit in certain regions has the potential to lead to worldwide economic difficulties that could be prolonged. A general slowdown in the economic activity caused by an extended period of economic uncertainty could adversely affect the Company’s businesses. Difficult financial and economic conditions could also adversely affect its customers’ ability to meet the terms of sale or its suppliers’ ability to fully perform their commitments to the Company.

Macroeconomic and geopolitical events may adversely affect the Company’s customers, access to products, or lead to general cost increases which could negatively impact the Company’s results of operations and financial condition.

The impact of events in foreign countries, which could result in increased political instability and social unrest, and the economic ramifications of significant budget deficits in the United States and changes in policy attributable to them at both the federal and state levels, could adversely affect the Company’s businesses and customers. Adverse economic or geopolitical events could potentially reduce the Company’s access to or increase prices associated with products sourced abroad. Such adverse events could lead to significant increases in the price of the products the Company procures, fuel and other supplies used in the Company’s business, utilities, or taxes that cannot be fully recovered through price increases. In addition, disposable consumer income could be affected by these events, which could have a negative impact on the Company’s results of operations and financial condition.

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Inflation and deflation may adversely affect the Company’s operating results.

It is difficult to forecast whether fiscal 2016 will be a period of inflation or deflation. Food deflation could reduce sales growth and earnings, while food inflation, combined with reduced consumer spending, could reduce gross profit margins. If the Company experiences significant inflation or deflation, especially in the context of continued lower consumer spending, then the Company’s financial condition and results of operations may be adversely affected.

Legal, Regulatory and Legislative Risks

The Company’s Military segment operations are dependent upon domestic and international military distribution. A change in the military commissary system, or level of governmental funding, could negatively impact the Company’s results of operations and financial condition.

Because the Company’s Military segment sells and distributes grocery products to military commissaries and exchanges in the United States and overseas, any material changes in the commissary system, the level of governmental funding to DeCA, military staffing levels, or the locations of bases may have a corresponding impact on the sales and operating performance of this segment. These changes could include privatization of some or all of the military commissary system, relocation or consolidation of commissaries and exchanges, base closings, troop redeployments or consolidations in the geographic areas containing commissaries and exchanges served by the Company, or a reduction in the number of persons having access to the commissaries and exchanges. Mandated reductions in the government expenditures, including those imposed as a result of sequestration, may impact the level of funding to DeCA and could have a material impact on the Company’s operations.

Government regulation could harm the Company’s business.

The Company is subject to extensive governmental laws and regulations including, but not limited to, employment and wage laws and regulations, regulations governing the sale of pharmaceuticals, alcohol and tobacco, minimum wage requirements, working condition requirements, public accessibility requirements, citizenship requirements, environmental regulation, and other laws and regulations. A violation or change of these laws could have a material effect on the Company’s business, financial condition and results of operations.

Like other companies that sell food and drugs, the Company’s corporate-owned retail stores are subject to various federal, state, local, and foreign laws, regulations, and administrative practices affecting its business. The Company must comply with numerous provisions regulating health and sanitation standards, facilities inspection, food labeling, and licensing for the sale of food, drugs, tobacco, and alcoholic beverages.

The Company cannot predict the nature of future laws, regulations, interpretations, or applications, or determine what effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state, local, and foreign regulatory requirements will have on its future business. They could, however, require that the Company recall or discontinue sale of certain products, make substantial changes to its facilities or operations, or otherwise result in substantial increases in operating expense. Any or all of such requirements could have an adverse effect on the Company’s results of operations and financial condition.

The Company is subject to state and federal environmental regulations.

Under various federal, state and local laws, ordinances and regulations, the Company may, as the owner or operator of its locations, be liable for the costs of removal or remediation of contamination at these current or former locations, whether or not the Company knew of, or were responsible for, the presences of such contamination. The failure to properly remediate such contamination may subject the Company to liability to third parties and may adversely affect its ability to sell or lease such property or to borrow money using such property as collateral.

Compliance with existing and future environmental laws regulating underground storage tanks may require significant capital expenditures and increased operating and maintenance costs.

The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. In the future, the Company may incur substantial expenditures for remediation of contamination that has not been discovered at existing or acquired locations. The Company cannot assure that it has identified all environmental liabilities at all of its current and former locations; that material environmental conditions not known to the Company do not exist; that future laws, ordinances or regulations will not impose material environmental liability on the Company; or that a material environmental condition does not otherwise exist as to any one or more of its locations. In addition, failure to comply with any environmental laws, ordinances or regulations or an increase in regulations could adversely affect the Company’s operating results and financial condition.

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Changes in accounting standards could materially impact the Company’s results.

Generally Accepted Accounting Principles (“GAAP”) and related accounting pronouncements, implementation guidelines, and interpretations for many aspects of the Company’s business, such as accounting for insurance and self-insurance, inventories, goodwill and intangible assets, store closures, leases, vendor and customer contracts, income taxes and share-based payments, are highly complex and involve subjective judgments. Changes in these rules or their interpretation could significantly change or add significant volatility to the Company’s reported earnings without a comparable underlying change in cash flow from operations.

Safety concerns regarding the Company’s products could harm the Company’s business.

It is sometimes necessary for the Company to recall unsafe, contaminated or defective products. Recall costs can be material and the Company might not be able to recover costs from its suppliers. Concerns regarding the safety of food products sold by the Company could cause customers to avoid purchasing certain products from the Company, or to seek alternative sources of supply for some or all of their food needs, even if the basis for concern is outside of the Company’s control. Any loss of confidence on the part of the Company’s customers would be difficult and costly to overcome. Any real or perceived issue regarding the safety of any food or drug items sold by the Company, regardless of the cause, could have a substantial and adverse effect on the Company’s business.

A number of the Company’s Food Distribution and Military segment associates are covered by collective bargaining agreements.

Approximately 51% and 16% of the Company’s associates in its Food Distribution and Military business segments, respectively, are covered by collective bargaining agreements which expire between April 2016 and October 2017. The Company expects that rising healthcare, pension and other employee benefit costs, among other issues, will continue to be important topics of negotiation with the labor unions. Upon the expiration of the Company’s collective bargaining agreements, work stoppages by the affected workers could occur if the Company is unable to negotiate an acceptable contract with the labor unions. This could significantly disrupt the Company’s operations. Further, if the Company is unable to control healthcare and pension costs provided for in the collective bargaining agreements, the Company may experience increased operating costs and an adverse impact on future results of operations.

Unions may attempt to organize additional associates.

While the Company believes that relations with its associates are good, the Company may continue to see additional union organizing campaigns. The potential for unionization could increase as any new related legislation or regulations are passed. The Company respects its associates’ right to unionize or not to unionize. However, the unionization of a significant portion of the Company’s workforce could increase the Company’s overall costs at the affected locations and adversely affect its flexibility to run its business in the most efficient manner to remain competitive or acquire new business and could adversely affect its results of operations by increasing its labor costs or otherwise restricting its ability to maximize the efficiency of its operations.

Costs related to multi-employer pension plans and other postretirement plans could increase.

The Company contributes to the Central States Southeast and Southwest Pension Fund (“Central States Plan” or “the Plan”), a multi-employer pension plan, based on obligations arising from its collective bargaining agreements with Teamsters locals 406 and 908. SpartanNash does not administer or control this Plan, and the Company has relatively little control over the level of contributions the Company is required to make. Currently, the Central States Plan is underfunded, and as a result, contributions are scheduled to increase. The Company expects that contributions to this Plan will be subject to further increases. Benefit levels and related issues will continue to create collective bargaining challenges. The amount of any increase or decrease in its required contributions to this Plan will depend upon the outcome of collective bargaining, the actions taken by the trustees who manage the Plan, governmental regulations, actual return on investment of Plan assets, the continued viability and contributions of other contributing employers, and the potential payment of withdrawal liability should the Company choose to exit a geographic area, among other factors.

Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan if it is underfunded. The assessed withdrawal liability represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. Withdrawal liability may be incurred under a variety of circumstances, including selling, closing or substantially reducing employment at a facility. Withdrawal liability could be material, and potential exposure to withdrawal liability may influence business decisions and could cause the Company to forgo business opportunities. The Company is currently unable to reasonably estimate such liability. On December 13, 2014, Congress passed the Multi-employer Pension Reform Act of 2014 (“MPRA”). The MPRA is intended to address funding shortfalls in both multi-employer pension plans and the Pension Benefit Guaranty Corporation. Because the MPRA is a complex piece of legislation, its effects on the Plan and potential implications for the Company are not known at this time. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.

-16-


On September 25, 2015, Central States submitted a Rescue Plan to the United States Department of Treasury (“Department of Treasury”) as permitted under the provisions of the MPRA relating to plans in “critical and declining status.” Under the Rescue Plan, Trustees seek to suspend the pension benefits of retirees and actives in order to save the pension plan from future financial failure. The proposed Rescue Plan is tiered and intended to equitably distribute benefit suspensions across three participant classes: orphans, participants and UPS transfer group. Under the MPRA, the Department of Treasury has 225 days in which to consider and act on the proposed Plan. Following the Department of Treasury’s review, Plan participants will be afforded the opportunity to consider and vote on the proposed benefit suspensions. Given the Department of Treasury’s review period and the amount of time necessary for a participant vote, Central States estimates that the proposed benefit suspensions, if approved, would not take effect until July 1, 2016. The Company is currently unable to reasonably estimate the potential impact of this Rescue Plan on its withdrawal liability.

The Company maintains defined benefit retirement plans for certain of its associates that do not participate in multi-employer pension plans. These plans are frozen. Expenses associated with the defined benefit plans may significantly increase due to changes to actuarial assumptions or investment returns on plan assets that are less favorable than projected. In addition, changes in the Company’s funding status could adversely affect the Company’s financial position.

Costs related to associate healthcare benefits are expected to continue to increase.

The Company provides health benefits for a large number of associates. The Company’s costs to provide such benefits continue to increase annually and recent legislative initiatives regarding healthcare reform have had a direct financial impact. However, the Company has carefully analyzed the costs of compliance with these initiatives and believes it has mitigated much of the impact through plan design and vendor negotiations. The Company will continue to stay abreast of these legislative changes and monitor their impact. Future legislative changes could negatively impact the Company’s financial condition and results of operations. In addition, the Company participates in various multi-employer health plans for its union associates, and the Company is required to make contributions to these plans in amounts established under collective bargaining agreements. The cost of providing benefits through such plans has escalated rapidly in recent years. The amount of any increase or decrease in the Company’s required contributions to these multi-employer plans will depend upon many factors, many of which are beyond its control. If the Company is unable to control the costs of providing healthcare to associates, it may experience increased operating costs, which may adversely affect the Company’s financial condition and results of operations.

Risks associated with insurance plan claims could increase future expenses.

The Company uses a combination of insurance and self-insurance to provide for potential liabilities for workers’ compensation, automobile and general liability, property insurance, director and officers’ liability insurance, and employee healthcare benefits. The liabilities that have been recorded for these claims represent the Company’s best estimate, using generally accepted actuarial reserving methods, of the ultimate obligations for reported claims plus those incurred but not reported for all claims incurred through January 2, 2016. Any actuarial projection of losses is subject to a high degree of variability. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, and changes in discount rates could all affect the level of reserves required and could cause future expense to maintain reserves at appropriate levels.

 

Item 1B. Unresolved Staff Comments

None.

 

 

Item 2.Properties

The following table lists the locations and approximate square footage of the Company’s facilities used in its Military and Food Distribution segments. The lease expiration dates for the Military segment range from August 2016 to November 2029, and for the Food Distribution segment range from July 2016 to July 2020. Most of the leases in the Food Distribution segment have additional renewal option periods available. The Company believes that these facilities are generally well maintained, are generally in good operating condition, have sufficient capacity, and are suitable and adequate to carry on its business for each of these segments.

-17-


 

Military Segment

 

 

Food Distribution Segment

 

 

 

Square Footage

 

 

 

 

Square Footage

 

Location

 

Leased

 

 

Owned

 

 

Total

 

 

Location

 

Leased

 

 

Owned

 

 

Total

 

Norfolk, Virginia

 

 

188,093

 

 

 

545,073

 

 

 

733,166

 

 

St. Cloud, Minnesota

 

 

 

 

 

329,046

 

 

 

329,046

 

Landover, Maryland

 

 

368,088

 

 

 

 

 

 

368,088

 

 

Fargo, North Dakota

 

 

10,400

 

 

 

288,824

 

 

 

299,224

 

Columbus, Georgia (1)

 

 

531,900

 

 

 

 

 

 

531,900

 

 

Minot, North Dakota

 

 

 

 

 

185,250

 

 

 

185,250

 

Pensacola, Florida

 

 

 

 

 

355,900

 

 

 

355,900

 

 

Omaha, Nebraska

 

 

4,384

 

 

 

686,783

 

 

 

691,167

 

Bloomington, Indiana

 

 

30,000

 

 

 

471,277

 

 

 

501,277

 

 

Sioux Falls, South Dakota

 

 

79,300

 

 

 

196,114

 

 

 

275,414

 

Oklahoma City, Oklahoma

 

 

 

 

 

608,543

 

 

 

608,543

 

 

Lumberton, North Carolina

 

 

386,129

 

 

 

 

 

 

386,129

 

San Antonio, Texas

 

 

 

 

 

461,544

 

 

 

461,544

 

 

Statesboro, Georgia

 

 

230,520

 

 

 

 

 

 

230,520

 

Total Square Footage

 

 

1,118,081

 

 

 

2,442,337

 

 

 

3,560,418

 

 

Bluefield, Virginia

 

 

 

 

 

187,531

 

 

 

187,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bellefontaine, Ohio

 

 

 

 

 

666,045

 

 

 

666,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lima, Ohio

 

 

 

 

 

517,552

 

 

 

517,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Westville, Indiana

 

 

 

 

 

631,944

 

 

 

631,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand Rapids, Michigan

 

 

 

 

 

1,179,582

 

 

 

1,179,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Square Footage

 

 

710,733

 

 

 

4,868,671

 

 

 

5,579,404

 

 

(1)

Location requires periodic lease payments to the holder of the outstanding industrial revenue bond, which is held by the Company. Upon expiration of the lease terms, the Company will take title to the property upon redemption of the bond.

 

The following table lists the retail banner, number of stores, geographic region and approximate square footage under each banner.

 

Retail Segment

 

 

 

 

 

Leased

 

 

Owned

 

 

Total

 

 

 

 

 

Number

 

Square

 

 

Number

 

 

Square

 

 

Number

 

Square

 

Grocery Store Retail Banner

 

Geographic Region

 

of Stores

 

Feet

 

 

of Stores

 

 

Feet

 

 

of Stores

 

Feet

 

Family Fare Supermarkets

 

Michigan, Minnesota, Nebraska, North Dakota

 

69

 

 

2,844,777

 

 

6

 

 

 

281,455

 

 

75

 

 

3,126,232

 

VG’s Food and Pharmacy

 

Michigan

 

10

 

 

461,698

 

 

1

 

 

 

37,223

 

 

11

 

 

498,921

 

D&W Fresh Markets

 

Michigan

 

9

 

 

435,153

 

 

2

 

 

 

84,458

 

 

11

 

 

519,611

 

Sun Mart

 

Colorado, Minnesota, Nebraska

 

2

 

 

55,333

 

 

8

 

 

 

238,100

 

 

10

 

 

293,433

 

No Frills

 

Iowa, Nebraska

 

9

 

 

426,881

 

 

 

 

 

 

 

 

9

 

 

426,881

 

Econofoods

 

Minnesota, Wisconsin

 

4

 

 

137,533

 

 

4

 

 

 

94,749

 

 

8

 

 

232,282

 

Dan's Super Market

 

North Dakota

 

6

 

 

278,477

 

 

 

 

 

 

 

 

6

 

 

278,477

 

Valu Land

 

Michigan

 

6

 

 

135,920

 

 

 

 

 

 

 

 

6

 

 

135,920

 

Bag ‘N Save

 

Nebraska

 

5

 

 

308,908

 

 

1

 

 

 

92,381

 

 

6

 

 

401,289

 

Family Fresh Market

 

Minnesota, Nebraska, Wisconsin

 

1

 

 

32,650

 

 

5

 

 

 

249,904

 

 

6

 

 

282,554

 

Family Thrift Center

 

South Dakota

 

3

 

 

127,107

 

 

1

 

 

 

60,200

 

 

4

 

 

187,307

 

Supermercado Nuestra Familia

 

Nebraska

 

1

 

 

23,211

 

 

2

 

 

 

83,279

 

 

3

 

 

106,490

 

Forest Hills Foods

 

Michigan

 

1

 

 

50,791

 

 

 

 

 

 

 

 

1

 

 

50,791

 

Pick ‘n Save

 

Ohio

 

1

 

 

45,608

 

 

 

 

 

 

 

 

1

 

 

45,608

 

Germantown Fresh Market

 

Ohio

 

1

 

 

31,764

 

 

 

 

 

 

 

 

1

 

 

31,764

 

Prairie Market

 

South Dakota

 

1

 

 

32,528

 

 

 

 

 

 

 

 

1

 

 

32,528

 

Dillonvale IGA

 

Ohio

 

1

 

 

25,627

 

 

 

 

 

 

 

 

1

 

 

25,627

 

Madison Fresh Market

 

Wisconsin

 

1

 

 

21,470

 

 

 

 

 

 

 

 

1

 

 

21,470

 

Purdue Fresh Market

 

Indiana

 

1

 

 

21,622

 

 

 

 

 

 

 

 

1

 

 

21,622

 

Wholesale Food Outlet

 

Iowa

 

1

 

 

19,620

 

 

 

 

 

 

 

 

1

 

 

19,620

 

Total

 

 

 

133

 

 

5,516,678

 

 

30

 

 

 

1,221,749

 

 

163

 

 

6,738,427

 

 

The Company also owns two additional fuel centers that are not reflected in the retail square footage above: a Family Fare Quick Stop in Michigan that is not included at a supermarket location but is adjacent to its corporate headquarters and Sun Mart Express Gas in Fergus Falls, Minnesota. Also not reflected in the retail square footage above are stand-alone pharmacies in Cannon Falls, Minnesota; Clear Lake, Iowa; and Barron, Wisconsin.

The Company’s service centers are located in Grand Rapids, Michigan; Minneapolis, Minnesota; and Norfolk, Virginia; consisting of office space of approximately 286,100 square feet in Company-owned buildings and 26,300 square feet in leased facilities. The Company also leases two additional off-site storage facilities consisting of approximately 50,300 square feet.

-18-


 

Item 3. Legal Proceedings

The Company is engaged from time-to-time in routine legal proceedings incidental to its business. The Company does not believe that these routine legal proceedings, taken as a whole, will have a material impact on its business or financial condition. While the ultimate effect of such actions cannot be predicted with certainty, management believes that their outcome will not result in a material adverse effect on the Company’s consolidated financial position, operating results or liquidity.

Various lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against the Company. While the ultimate effect of such lawsuits and claims cannot be predicted with certainty, management believes that their outcome will not result in an adverse effect on the Company’s consolidated financial position, operating results or liquidity. Legal proceedings, various lawsuits, claims, and other matters are more fully described in Note 8 to the consolidated financial statements in Item 8 of this report; this information is incorporated herein by reference.

 

 

Item 4.Mine Safety Disclosure

Not Applicable

 

 

 

-19-


 

 

PART II

 

Item  5.Market for Registrant’s Common Equity and Related Stockholder Matters

SpartanNash common stock is traded on the NASDAQ Global Select Market under the trading symbol “SPTN.”

Stock sale prices are based on transactions reported on the NASDAQ Global Select Market. Information on quarterly high and low sales prices for SpartanNash common stock for each of the last two fiscal years is as follows:

 

 

Year Ended January 2, 2016

 

 

Full Year

 

 

4th Quarter

 

 

3rd Quarter

 

 

2nd Quarter

 

 

1st Quarter

 

 

(52 Weeks)

 

 

(12 Weeks)

 

 

(12 Weeks)

 

 

(12 Weeks)

 

 

(16 Weeks)

 

Common stock price - High

$

 

33.89

 

 

$

 

28.94

 

 

$

 

33.84

 

 

$

 

33.89

 

 

$

 

32.73

 

Common stock price - Low

 

 

20.99

 

 

 

 

20.99

 

 

 

 

24.85

 

 

 

 

30.11

 

 

 

 

24.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended January 3, 2015

 

 

Full Year

 

 

4th Quarter

 

 

3rd Quarter

 

 

2nd Quarter

 

 

1st Quarter

 

 

(53 Weeks)

 

 

(13 Weeks)

 

 

(12 Weeks)

 

 

(12 Weeks)

 

 

(16 Weeks)

 

Common stock price - High

$

 

26.89

 

 

$

 

26.89

 

 

$

 

22.50

 

 

$

 

24.68

 

 

$

 

25.74

 

Common stock price - Low

 

 

19.16

 

 

 

 

19.88

 

 

 

 

19.16

 

 

 

 

19.44

 

 

 

 

21.00

 

At February 26, 2016, there were approximately 1,340 shareholders of record of SpartanNash common stock. The Company has paid a quarterly cash dividend every quarter since the fourth quarter of fiscal 2006.

The table below outlines quarterly dividends paid on Spartan Stores and SpartanNash common stock in each of the last three fiscal years as well as the Board of Directors’ currently anticipated quarterly dividend:

 

Dividend per

 

Effective Quarter

common share

 

1st through 4th quarters Fiscal December 28, 2013

 

 

0.09

 

1st through 4th quarters Fiscal January 3, 2015

 

 

0.12

 

1st through 4th quarters Fiscal January 2, 2016

 

 

0.135

 

1st quarter Fiscal December 31, 2016

 

 

0.15

 

 

Under its senior revolving credit facility, the Company is generally permitted to pay dividends in any fiscal year up to an amount such that all cash dividends, together with any cash distributions, prepayments of the senior notes and share repurchases, do not exceed $25.0 million. Additionally, the Company is generally permitted to pay cash dividends and repurchase shares in excess of $25.0 million in any fiscal year so long as its Excess Availability, as defined in the senior revolving credit facility, is in excess of 10% of the Total Borrowing Base before and after giving effect to the prepayments, repurchases and dividends. Although the Company expects to continue to pay a quarterly cash dividend, adoption of a dividend policy does not commit the Board of Directors to declare future dividends. Each future dividend will be considered and declared by the Board of Directors at its discretion. Whether the Board of Directors continues to declare dividends and repurchase shares depends on a number of factors, including the Company’s future financial condition, anticipated profitability and cash flows, and compliance with the terms of its credit facilities. In May 2011, the Board of Directors authorized a five-year share repurchase program for up to $50 million of SpartanNash’s common stock.

During the fiscal years ended January 2, 2016 and January 3, 2015, the Company repurchased 282,363 and 245,956 shares of common stock for approximately $9.0 million and $5.0 million, respectively. The Company did not repurchase any shares under this program during the 39-week period ended December 28, 2013. The approximate dollar value of shares that may yet to be purchased under the repurchase plan was $12.3 million as of January 2, 2016.

The equity compensation plans table in Item 12 is here incorporated by reference.

There were no purchases of the Company’s own common stock during the last quarter of the fiscal year ended January 2, 2016.

 

Performance Graph

Set forth below is a graph comparing the cumulative total shareholder return on SpartanNash common stock to that of the Russell 2000 Total Return Index and the NASDAQ Retail Trade Index, over a period beginning March 26, 2011 and ending on January 2, 2016.

-20-


 

 

Cumulative total return is measured by the sum of (1) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (2) the difference between the share price at the end and the beginning of the measurement period, divided by the share price at the beginning of the measurement period.

The dollar values for total shareholder return plotted above are shown in the table below:

 

 

March 26,

 

 

March 31,

 

 

March 30,

 

 

December 28,

 

 

January 3,

 

 

January 2,

 

 

2011

 

 

2012

 

 

2013

 

 

2013

 

 

2015

 

 

2016

 

SpartanNash

$

 

100.00

 

 

$

 

122.17

 

 

$

 

120.70

 

 

$

 

165.32

 

 

$

 

183.74

 

 

$

 

157.25

 

Russell 2000 Total Return Index

 

 

100.00

 

 

 

 

102.25

 

 

 

 

118.92

 

 

 

 

146.54

 

 

 

 

153.32

 

 

 

 

147.27

 

NASDAQ Retail Trade

 

 

100.00

 

 

 

 

130.49

 

 

 

 

141.80

 

 

 

 

168.88

 

 

 

 

188.74

 

 

 

 

198.20

 

 

The information set forth under the Heading “Performance Graph” shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act, except to the extent that the registrant specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act.

 

 

-21-


 

 

Item 6. Selected Financial Data  

The following table provides selected historical consolidated financial information of SpartanNash for each of the five fiscal years and periods ended March 31, 2012 through January 2, 2016. For comparability purposes, the Company has also provided selected historical consolidated financial information for the 51-week period ended December 28, 2013.

 

 

Year Ended

 

 

Period Ended

 

 

Fiscal Year Ended

 

 

January 2,

 

 

January 3,

 

 

December 28,

 

 

December 28,

 

 

March 30,

 

 

March 31,

 

 

2016

 

 

2015

 

 

2013

 

 

2013 (A)

 

 

2013

 

 

2012

 

(In thousands, except per share data)

(52 Weeks)

 

 

(53 Weeks)

 

 

(51 Weeks)

 

 

(39 Weeks)

 

 

(52 Weeks)

 

 

(53 Weeks)

 

Statements of Earnings Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

7,651,973

 

 

$

 

7,916,062

 

 

$

 

3,190,039

 

 

$

 

2,597,230

 

 

$

 

2,608,160

 

 

$

 

2,634,226

 

Cost of sales

 

 

6,536,291

 

 

 

 

6,759,988

 

 

 

 

2,570,516

 

 

 

 

2,110,350

 

 

 

 

2,062,616

 

 

 

 

2,078,116

 

Gross profit

 

 

1,115,682

 

 

 

 

1,156,074

 

 

 

 

619,523

 

 

 

 

486,880

 

 

 

 

545,544

 

 

 

 

556,110

 

Selling, general and administrative expenses

 

 

975,572

 

 

 

 

1,022,387

 

 

 

 

546,100

 

 

 

 

433,450

 

 

 

 

482,987

 

 

 

 

489,650

 

Merger integration and acquisition

 

 

8,433

 

 

 

 

12,675

 

 

 

 

20,993

 

 

 

 

20,993

 

 

 

 

 

 

 

 

 

Restructuring charges and asset impairment (B)

 

 

8,802

 

 

 

 

6,166

 

 

 

 

16,877

 

 

 

 

15,644

 

 

 

 

1,589

 

 

 

 

(23

)

Operating earnings

 

 

122,875

 

 

 

 

114,846

 

 

 

 

35,553

 

 

 

 

16,793

 

 

 

 

60,968

 

 

 

 

66,483

 

Interest expense

 

 

21,820

 

 

 

 

24,414

 

 

 

 

12,209

 

 

 

 

9,219

 

 

 

 

13,410

 

 

 

 

15,037

 

Loss on debt extinguishment

 

 

1,171

 

 

 

 

 

 

 

 

8,289

 

 

 

 

5,527

 

 

 

 

5,047

 

 

 

 

 

Other, net

 

 

(375

)

 

 

 

(17

)

 

 

 

(27

)

 

 

 

(23

)

 

 

 

(756

)

 

 

 

(110

)

Earnings before income taxes and discontinued operations

 

 

100,259

 

 

 

 

90,449

 

 

 

 

15,082

 

 

 

 

2,070

 

 

 

 

43,267

 

 

 

 

51,556

 

Income taxes

 

 

37,093

 

 

 

 

31,329

 

 

 

 

5,914

 

 

 

 

841

 

 

 

 

15,425

 

 

 

 

19,686

 

Earnings from continuing operations

 

 

63,166

 

 

 

 

59,120

 

 

 

 

9,168

 

 

 

 

1,229

 

 

 

 

27,842

 

 

 

 

31,870

 

Loss from discontinued operations, net of taxes (C)

 

 

(456

)

 

 

 

(524

)

 

 

 

(725

)

 

 

 

(488

)

 

 

 

(432

)

 

 

 

(112

)

Net earnings

$

 

62,710

 

 

$

 

58,596

 

 

$

 

8,443

 

 

$

 

741

 

 

$

 

27,410

 

 

$

 

31,758

 

Basic earnings from continuing operations per share

$

 

1.68

 

 

$

 

1.57

 

 

$

 

0.39

 

 

$

 

0.05

 

 

$

 

1.28

 

 

$

 

1.40

 

Diluted earnings from continuing operations per share

 

 

1.67

 

 

 

 

1.57

 

 

 

 

0.39

 

 

 

 

0.05

 

 

 

 

1.27

 

 

 

 

1.39

 

Basic earnings per share

 

 

1.67

 

 

 

 

1.56

 

 

 

 

0.36

 

 

 

 

0.03

 

 

 

 

1.26