SpartanNash Co - Annual Report: 2017 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended December 30, 2017.

OR

For the transition period from              to             .

Commission File Number: 000-31127

SPARTANNASH COMPANY

(Exact Name of Registrant as Specified in Its Charter)

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

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

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  ☐

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  ☒

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  ☒    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  ☒    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.  ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

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 14, 2017 (which was the last trading day of the registrant’s second quarter in the fiscal year ended December 30, 2017) was $955,521,432.

The number of shares outstanding of the registrant’s Common Stock, no par value, as of February 23, 2018 was 36,048,591, all of one class.

DOCUMENTS INCORPORATED BY REFERENCE

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. Undue reliance should not be placed 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. These risks and uncertainties include general business conditions, changes in overall economic conditions that impact consumer spending, the Company’s ability to integrate acquired assets, the impact of competition and other factors which are often beyond the control of the Company, and other risks listed in Part I, “Item 1A. Risk Factors,” of this report and risks and uncertainties not presently known to the Company or that the Company currently deems immaterial.

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.

PART I

Item 1.  Business

Overview

SpartanNash Company (together with its subsidiaries, “SpartanNash” or the “Company”) is a Fortune 350 company whose core businesses include distributing grocery products to independent grocery retailers (“independent retailers”), national retailers, food service distributors, its corporate owned retail stores, and United States (“U.S.”) military commissaries and exchanges. SpartanNash serves customer locations in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Italy, Bahrain, Djibouti and Egypt.  Through its Military segment, SpartanNash is a leading distributor of grocery products to military commissaries in the United States. The Company’s Retail segment operates neighborhood supermarkets that emphasize value beyond price, affordable wellness, commitment to local products and, as demonstrated throughout the organization, caring for their community and environment. The Company operates three reportable business segments: Food Distribution, Military and Retail.

The Company’s fiscal year end is the Saturday closest to December 31. The following discussion is as of and for the fiscal years ending or ended December 29, 2018 ("2018"), December 30, 2017 (“2017” or “current year”), December 31, 2016 (“2016” or “prior year”) and January 2, 2016 (“2015”), all of which include 52 weeks, and January 3, 2015 (“2014”), which included 53 weeks. All fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks and will generally include the Easter holiday. The fourth quarter includes the Thanksgiving and Christmas holidays, and depending on the fiscal year end, may include the New Year’s holiday.

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”) and the combined company was named SpartanNash Company. Unless the context otherwise requires, the use of the terms “SpartanNash,” and the “Company” in this Annual Report on Form 10-K refers to the surviving corporation SpartanNash Company and, as applicable, its consolidated subsidiaries.

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On January 6, 2017, the Company acquired certain assets and assumed certain liabilities of Caito Foods Service (“Caito”) and Blue Ribbon Transport (“BRT”). Caito is a leading supplier of fresh fruit and vegetables as well as value-added fresh-cut fruits and vegetables and prepared meals to retailers and food service distributors across 21 states in the Southeast, Midwest and Eastern United States. BRT offers temperature-controlled distribution and logistics services throughout North America. The acquisition strengthened the Company’s fresh product offerings and value-added services, such as freshly-prepared centerplate and side dish categories, and also complements the Company’s existing supply chain network.

The Company’s differentiated business model of Food Distribution, Military and Retail operations utilizes the complementary nature of each segment and enhances the ability of the Company’s independent retailers to compete in the grocery industry long-term. The model produces operational efficiencies, helps stimulate distribution product demand, and provides sharper visibility and broader business growth options. In addition, the diversification from Food Distribution, Military and Retail provides added flexibility to pursue the best long-term growth opportunities in each segment.

SpartanNash’s long-term goal is to create value for the Company's shareholders, retailers, and customers. To support these strategies, a well differentiated product offering in its Food Distribution, Military, and Retail segments has been established, as well as, the following key management priorities and strategies:

Food Distribution Segment:

Military Segment:

Retail Segment:

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Supply Chain Network:

Food Distribution Segment

The Company’s Food Distribution segment uses a multi-channel sales approach to distribute grocery products to independent retailers, national retailers, food service distributors, e-commerce providers, and the Company’s 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 $4.9 billion for 2017. As of the end of 2017, the Company believes it is the sixth largest wholesale distributor, in terms of annual revenue, to supermarkets in the United States.

Customers. The Company’s Food Distribution segment supplies grocery products to a diverse group of approximately 2,100 independent retailers with operations ranging from a single store to supermarket chains with over 20 stores, food service distributors and the Company’s corporate owned retail stores. As of December 30, 2017, the Company operates in 47 states by leveraging a platform of 19 distribution centers servicing the Food Distribution and Military segments, with the greatest sales concentration predominantly in the Midwest and South regions. This extensive geographic reach drives economies of scale and provides opportunities for independent retailers to purchase products at competitive prices in order to compete in the grocery industry long-term.

Through its Food Distribution segment, the Company also services national retailers, including Dollar General. Sales to Dollar General are made to more than 14,000 of its retail locations, with sales representing 14.0%, 11.2%, and 10.7% of consolidated net sales for 2017, 2016 and 2015, respectively. The Company’s Food Distribution customer base is diverse, and no other single customer exceeded 3% of consolidated net sales in any of the years presented.

The Company’s ten largest Food Distribution customers (excluding corporate owned retail stores) accounted for approximately 52.0% of total Food Distribution net sales for 2017. Approximately 83% of Food Distribution net sales for 2017 are covered under supply agreements with independent retailers.

Products. The Company’s Food Distribution segment provides a selection of approximately 60,000 stock-keeping units (SKUs) of nationally branded and private brand 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. With the acquisition of Caito, the product offering also includes fresh protein-based foods, prepared meals, and value-added products such as fresh-cut fruits and vegetables and prepared salads. These product offerings, along with best in class services, allow independent retailers the opportunity to support the majority of their operations with a single supplier. Meeting consumers’ needs will continue to be SpartanNash’s priority as it continues to leverage its complementary business model of Food Distribution, Military and Retail operations.

Valued-Added Services. The Company provides a comprehensive menu of valued-added services designed to assist retailers in becoming more profitable, efficient, competitive, and informed. The Company’s service departments are strategic partners who fill the gaps when time and resources are limited for the independent customers. From real estate and site surveys to a full spectrum of merchandising and marketing solutions, independent retailers can find the support they need to effectively operate their businesses. The Company provides over 100 distinct value-added services, including the following:

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Military Segment

The Company’s Military segment contracts with manufacturers and brokers to distribute a wide variety of grocery products, including dry groceries, beverages, meat, and frozen foods, primarily to U.S. military commissaries and exchanges. The Company’s Military segment, together with its partner, CPFD, represents the only worldwide delivery solution for providing grocery products to DeCA.

The Company is also the DeCA exclusive worldwide supplier of private brand grocery and related products to U.S. military commissaries. In accordance with its contract with DeCA, the Company procures the grocery and related products from various manufacturers and upon receiving customer orders from DeCA, either delivers the products to the U.S. military commissaries itself or engages CPFD to deliver the products on its behalf. There are approximately 450 SKUs of private brand products currently in the DeCA system as of December 30, 2017, and the Company anticipates up to 1,400 SKUs will be added under the program in 2018.

The distributed grocery products are delivered to over 160 military commissaries and over 440 exchanges located in more than 45 states across the United States, and the District of Columbia, Europe, Cuba, Puerto Rico, Italy, Bahrain, Djibouti 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.

DeCA operates a chain of 237 commissaries on U.S. military installations across the world that sells approximately $4.8 billion of grocery products annually. DeCA contracts with manufacturers to obtain grocery 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 (“FDS”) 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.

As of December 30, 2017, the Company has approximately 250 distribution contracts representing approximately 600 manufacturers that supply products to the DeCA commissary system and various exchange systems. Generally, larger contracts or those subject to a request-for-proposal process have definitive durations, whereas smaller contracts generally have indefinite terms; and all contract types allow for termination by either party without cause upon 30 days prior written notice to the other party. The contracts typically specify which 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 45.6% of the Company’s Military segment sales for 2017.

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. Due to the unique terms of this arrangement, working capital requirements are significant.

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 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 address the unique aspects of its business, and provide the Company’s manufacturer customers with a web-based, interactive means of accessing critical order, inventory and delivery information.

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Retail Segment

As of December 30, 2017, the Company operates 145 corporate owned retail stores in nine states, predominantly in the Midwest region primarily under the banners of Family Fare Supermarkets, D&W Fresh Market, VG’s Grocery, Dan’s Supermarket and Family Fresh Market. Retail banners and numbers of stores are more fully detailed in Item 2, “Properties,” of this report. The Company’s corporate owned retail stores range in size from approximately 14,000 to 90,000 total square feet, or on average, approximately 42,000 total square feet per store.

The Company’s neighborhood market strategy distinguishes its corporate owned retail stores from supercenters and limited assortment stores by focusing on value beyond price, affordable wellness, commitment to local products, and caring for the community and environment. The Company’s strategy is also focused on increasing customer satisfaction through quality service and convenience, and in the second quarter of 2017, the Company introduced Fast Lane, its new online ordering and curbside pick-up service. The Company now offers the service in approximately 40 corporate owned retail stores and anticipates rolling it out to up to 30 stores in 2018. The Company also began piloting home delivery services in the fourth quarter of 2017 to further improve convenience and service for its customers.

The Company’s corporate owned retail stores offer nationally branded and private brand grocery products (see “Marketing and Merchandising – Private Brands”), as well as 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. Private brand grocery products typically generate higher retail margins while also improving customer loyalty by offering quality products at affordable prices.

As of December 30, 2017, the Company offers pharmacy services in 87 of its corporate owned retail stores (of which 76 of the pharmacies are owned), and operates one free-standing pharmacy location. The Company believes the pharmacy service offering in its corporate owned retail stores is an important part of the consumer experience. In its Michigan pharmacies and a number of its pharmacies in Minnesota and Nebraska, the Company offers free medications (antibiotics, diabetic medications and prenatal vitamins) along with generic drugs for $4 and $10, and meal planning solutions for preventative health and education for its customers.

As of December 30, 2017, the Company operates 31 fuel centers primarily at its corporate owned retail stores operating predominantly under the banners Family Fare Quick Stop and D&W Quick Stop. 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’s corporate owned retail stores are primarily the result of acquisitions prior 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:

During 2017, the Company completed five major remodels and also opened one new fuel center. In connection with the remodeling efforts, the Company converted three corporate owned retail stores to the Family Fare Supermarkets banner. The Company expects to continue making targeted capital investments during 2018 through remodels at select corporate owned retail stores and, if opportunities arise, by either opening additional fuel centers or entering into partnerships with existing fuel operations. The Company will continue to evaluate its store base and expects to close or sell five to seven stores in 2018 depending on circumstances and opportunities.

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Supply Chain Network

The Company continues to integrate its supply chain organization to optimize the network, increase asset utilization and leverage programs that will drive more value for its retailers, customers, and shareholders. The Company continually reviews the optimization of its network and, through doing so, has added Food Distribution operations to several facilities which were previously dedicated solely to the Military segment. The Company consolidated one warehouse during the year and may close, open, or acquire warehouses in the future depending on needs and opportunities. The Company also made significant progress in integrating the Caito and BRT operations by rolling out Caito products to other warehouses and customers and by integrating BRT with its managed freight function to gain efficiencies and reduce costs, as well as drive growth in the brokerage business by maximizing backhaul opportunities and meeting supplier needs.

The Company’s distribution network is comprised of 19 distribution centers, which are utilized to service the Food Distribution and Military segments. The distribution centers provide for approximately 8.7 million total square feet of warehouse space. The Company has new and ongoing initiatives to improve the efficiency of its supply chain through innovation, investments in technology and automation.

The Company operates a fleet of approximately 500 over-the-road tractors, 450 dry vans, and 1,000 refrigerated trailers. Through routing optimization systems, the Company carefully manages the more than 64 million miles driven by its fleet and third party carriers annually servicing military commissaries, exchanges, independent retailers, national retailers and corporate owned retail stores. During 2017, the Company substantially completed the uniform branding of all of its tractors with the SpartanNash logo and tagline “Taking Food Places.” In addition, the Company continues to add lift gates to its existing fleet in order to better service a more diverse group of customers.

Reporting Segment Financial Data and Products

Refer to the segment information in the notes to consolidated financial statements for additional information about the Company’s sales by type of similar products and services. All of the Company’s sales and assets are in the United States of America. Consolidated net sales include the net sales of its Food Distribution business, which exclude sales to corporate owned retail stores, the net sales of its Military segment, and the net sales of its corporate owned retail store and fuel centers in its Retail segment.

Discontinued Operations

Certain of the Company’s Food Distribution and Retail operations have been recorded as discontinued operations. Discontinued operations consist of certain locations that have been closed or sold.

Marketing and Merchandising

General. The Company continues to align its marketing and merchandising strategies with current consumer behaviors by delivering initiatives centered on personalization, value beyond price, affordable wellness, local focus and social responsibility – all designed to deliver a superior shopping experience for customers. During 2017, the Company refreshed its brand positioning for Family Fare, its primary Retail banner, to incorporate these areas of focus. 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 data from its “yes” loyalty program gives it competitive insight into consumer shopping 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. As investments are made to remodel and/or rebanner various stores, the Company continues to roll out the “yes” program to expand its knowledge of its customers and to provide its loyalty rewards in additional markets.

The Company’s investment to further strengthen its knowledge of the consumer has continued to drive process improvements in several areas: creation of a robust self-serve data tool that enables category managers to make consumer centric merchandising and marketing decisions; continuous refinement of Key Value Items (“KVI”) analyses that align pricing for the most price sensitive items with the most price sensitive customer segments; 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 initiatives better position the Company to deliver a shopping experience that constantly responds to the ever-changing needs of its consumers.

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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. New mobile apps specific to each Retail banner were recently launched, providing consumers with the ability to view store ads, create shopping lists, shop via Fast Lane, clip coupons, and join virtual shopping clubs, all from their mobile device. This will help the Company further build longer-term customer loyalty through convenience and value, 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.

In addition to sharing the expertise gained in its Retail operations, the Company differentiates itself from its competitors by offering a full set of value added support services to its Food Distribution customers. These services, which are further described above, help the independent retailers to operate and compete effectively, and many of them are not offered by the Company’s competition.

As the Company works to better differentiate its Retail stores and roll out its refreshed brand positioning, the Company is selectively adding products and services to better meet customers’ changing needs. For instance, the Company is adding full service meat and seafood departments which include many items handmade in store, and has added produce preparation services, smokehouses, expanded beer and wine selections, and other offerings to certain stores to enhance the customers’ experience. The Company has been adding signage and improved displays in departments such as pet products, laundry, and snacks in order to improve foot traffic in these aisles and drive sales. The Company continues to add fuel centers and Starbucks Coffee or Caribou Coffee shops in certain corporate owned retail stores, and also provides consumers with fuel purchase discounts at fuel centers through its corporate owned retail stores or by partnering with third party fuel centers.

As consumers increasingly emphasize affordable wellness, the Company believes that it can be a provider and resource for products and services that will support their needs. In 2017, the Company continued to expand its offerings and partnerships and undertook the following key initiatives. First, the Company continued to expand its “Living Well” product offerings through in-line merchandising concepts. Second, the Company established partnerships with health systems and providers to provide wellness specialists-led store tours to help educate consumers to make healthier food choices. Third, the Company increased its retail product offering and assortment for organic, gluten-free, meat-free, non-GMO products and other healthier food options. Finally, the Company offers a best in class pharmacy program, including $4 and $10 generics and free diabetic and prenatal prescriptions.

In support of its commitment to local products and caring for the community and environment, the Company is proud to work with local farmers and vendors to provide locally grown produce and products in many of its stores. The Company offers a significant selection of local products in many of its stores, well in excess of most of its competitors’ offerings. In some of its stores the Company collects items from customers for recycling, and the Company has been recognized as a best in class recycler of its own waste. Also, in an effort to reduce costs and reduce its environmental footprint, the Company has many initiatives to reduce energy usage, including the installation of energy efficient lighting and refrigeration in its stores.

Private Brands. SpartanNash provides a best in class private brand program, offering a full line of proprietary and licensed private brands in its corporate owned retail stores and its independent retailer customers, as well as partnering with DeCA in the design and launch of its military private brands. SpartanNash believes that its private brand offerings are some of its most valuable strategic assets, demonstrated through customer loyalty and profitability. The Company continues to invest in improvements to its private brands by offering quality, value, and assortment, and believes the success of its private brands to be of vital importance. The Company’s products have been frequently recognized for excellence in packaging design and product development.

The Company continues to enhance its private brand programs for both independent customers and corporate owned retail stores, and in 2017, launched its Our Family® private brand into its Michigan stores. The transition from the Spartan™ brand to Our Family® provides the Company with a system-wide, national brand equivalent or better quality program, as well as allows the Company to streamline its supply chain to deliver a larger variety of product offerings at a lower cost to consumers. The transition to Our Family® as the Company’s primary private brand is expected to be completed in the first half of 2018. Also in 2017, the Company began incorporating its own fresh-cut fruits and vegetables into the Open Acres™ private brand, which supports the Company’s living well offering. Additionally, Eternal Oceans™ was launched as the Company’s sustainability initiative for seafood within the Open Acres™ brand. SpartanNash also launched a product declaration “free from” initiative, with a goal of assigning brand specific bullets alerting consumers of certain undesirable ingredients that have been eliminated, creating a “cleaner” product offering. The Company expects this program to continue throughout 2018 and become core to the Company’s product development principles in all future development. The Company plans to introduce approximately 350 additional new items in 2018 throughout its private brand portfolio, which includes the rollout of the Good to Go™ meal solutions program.

SpartanNash currently markets and distributes private brand items primarily under the following brands: Our Family® (national brand equivalent or better grocery products); Open Acres™ (fresh products); Top Care (health and beauty care); Tippy Toes (baby); Full Circle™ (organic and wellness); Culinary Tours™ (premium quality foods); PAWS Premium (pet supplies); and Valu Time (value). SpartanNash is also the exclusive worldwide distributor of DeCA’s private brands, Freedom’s Choice® and Home Base®.

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Competition

The Company’s Food Distribution, Military and Retail segments operate in a highly competitive industry, which typically results 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, deep discount retailers, limited assortment stores and wholesale membership clubs, many of whom have greater resources than the Company. The Company also faces competition from rapidly growing alternative retail channels, such as dollar stores, discount supermarket chains, Internet-based retailers and meal-delivery services.

Food Distribution competes directly with a number of traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. In addition, the Company’s independent customers face intense competition from supercenters, deep discounters, mass merchandisers, limited assortment stores, and e-commerce providers. The Company partners with its customers to help them compete effectively. 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.

The Company is one of ten or fewer 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, delicatessen 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 strong with respect to all of these factors within the geographic areas where it competes.

Despite the ongoing commissary sales challenges, the Company has been working diligently to realize opportunities and has expanded vendor relationships to new military bases and continues to roll out the Company’s private brand product offerings. The Company believes that the private brand offering, when fully executed, will drive more traffic and business into the commissaries as a whole. By providing a combination of national and private brand products, the commissaries are offering one-stop shopping for military customers, which should benefit all of the constituents of the DeCA system.

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, convenience and consistency of service. In addition to competing with traditional grocery stores, the Company competes with supercenters, deep discounters, mass merchandisers, limited assortment stores, and e-commerce providers. The Company believes it has developed and implemented strategies and processes that allow it to be competitive in its Retail segment by providing convenience, customer experience, and the assortment consumers want. 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, nine competitor supercenters opened in geographic areas in which the Company currently operates corporate owned retail stores with four additional openings expected to occur during 2018. As a result of these openings, the Company believes the majority of its supermarkets compete with one or more supercenters. The Company is also responding to growing competition from online and non-traditional retailers by adding new options and services such as Fast Lane, its new online ordering and curbside pick-up service, as well as home delivery.

Seasonality

In certain geographic areas, the Company’s sales and operating performance varies with seasonality. Many 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. All fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks and will generally include the Easter holiday. The fourth quarter includes the Thanksgiving and Christmas holidays, and depending on the fiscal year end, may include the New Year’s holiday.

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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, tradenames, and other proprietary information, some of which are of material importance to its business.

Technology

In 2017, the Company focused on the integration of systems relating to the Caito acquisition and the remaining systems for the merger with Nash-Finch. Additionally, there have been many projects to expand and update technologies in support of various business and operational needs, such as the design and initial development of a new promotion and ad planning system for use in both the Food Distribution and Retail businesses.

Supply Chain. During 2017, the Company continued to implement the standard order management system, which is expected to be completed in 2018. Standardization of the inventory management, distribution pricing and invoicing system was also initiated in 2017 with an anticipated completion date of 2019. The Company completed the implementation of a new environmental integrity monitoring system for the transportation fleet, implemented technology support associated with Food Safety Modernization Act requirements and has successfully converted more than half of the Company’s independent customers to state-of-the-art Business-to-Business technology.

Retail Systems. The Company implemented Fast Lane, a click-and-collect grocery ordering system, in approximately 40 corporate owned retail stores and is currently testing delivery in two locations. Fast Lane will continue to be deployed in additional stores in 2018. The Company enhanced its electronic payment system to support chip and pin/signature cards in all retail locations and also implemented a new back-end processing system. The Company also completed technology support for new Nutrition Labeling requirements, and is in the final testing phase of a major upgrade to its digital mobile application for customer use. The Company began the testing of a major upgrade and replacement of the computer-assisted ordering system used in the corporate retail locations, and also initiated preparations for testing a 2018 pilot of a major upgrade to the Point-of-Sale software.

Administrative Systems and Infrastructure. In the first quarter of 2017, the Company completed the consolidation of the accounts receivable system from the Nash-Finch merger. Additionally, the general ledger, fixed asset systems, EDI processing, payroll, labor management and human resources systems were standardized as part of the Caito integration. Additional upgrades to the infrastructure in the primary and back up data centers were also completed to improve the flexibility of disaster recovery and non-stop processing.

Associates

As of December 30, 2017, the Company employs approximately 14,800 associates, 9,100 on a full-time basis and 5,700 on a part-time basis. Approximately 1,200 associates, or 8% of the total workforce, were represented by unions under collective bargaining agreements. The collective bargaining agreements covering these associates will expire between January 2019 and February 2021. The Company considers its relations with its union and non-union associates to be good and has 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. Many of the Company’s products are subject to federal Food and Drug Administration (“FDA”) and United States Department of Agriculture (“USDA) regulation. The Company believes that it is in substantial compliance in all material respects with the FDA, USDA 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.

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Available Information

The address of the 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 of 1934 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 the Company’s competitors are much larger and may be able to compete more effectively.

The Company’s Food Distribution and Retail segments have many competitors, including regional and national grocery distributors, large chain stores that have integrated wholesale and retail operations, mass merchandisers, e-commerce providers, deep discount retailers, limited assortment stores and wholesale membership clubs. The Company’s Military segment faces competition from large national and regional food distributors and smaller distributors. Many of the Company’s competitors have greater resources than the Company.

Industry consolidation, alternative store formats, nontraditional competitors and e-commerce have contributed to market share losses for traditional grocery stores. The Company’s Food Distribution, Military and Retail segments are primarily focused on traditional retail grocery trade, which faces competition from faster growing alternative retail channels, such as dollar stores, discount supermarket chains, Internet-based retailers and meal-delivery services. The Company expects these trends to continue. If the Company is not successful in competing with these alternative channels, or growing sales into such channels, its business or financial results may be adversely impacted.

The Company may not be able to successfully integrate the assets of Caito Foods Service (“Caito”) and Blue Ribbon Transport (“BRT”), and the Company may incur significant costs to integrate and support these and other assets it acquires.

In January 2017, the Company acquired the assets of Caito and its affiliate, BRT. The integration of acquired assets requires significant time and resources, and the Company may not manage these processes successfully. As part of this acquisition, the Company acquired a new Fresh Kitchen facility that was in the process of being constructed. The Fresh Kitchen had no history of operations, and the Company experienced delays in commencing its operation and achieving efficient levels of production volume. The Company expects that the Fresh Kitchen will not be profitable in the short-term, and there is no guarantee it will be profitable in the long-term. In addition, some grocery retailers previously serviced by Caito discontinued their purchases following the Company’s acquisition of the Caito assets. The Company is making investments of resources to support the acquired Caito and BRT businesses and replace lost volume, which will result in significant ongoing operating expenses and may divert resources and management attention from other areas of the business. If the Company fails to successfully integrate these assets and develop new business opportunities, it may not realize the benefits expected from the transaction and its business may not perform to expectations.

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The Company’s private brand program for U.S. military commissaries may not achieve the desired results.

In December 2016, the Defense Commissary Agency (“DeCA” or “the Agency”), which operates U.S. military commissaries worldwide, competitively awarded the Company the contract to support and supply products for the Agency’s new private brand product program. Private brand products have not previously been offered in the Agency’s commissaries. The Company has invested and will continue to invest significant resources as it partners with DeCA to develop the program, and there is no guarantee of its success. The Company expects that DeCA will face significant competition in each product category from national brands that are familiar to consumers. If the Agency is unable to drive traffic and business at the commissaries by offering one-stop shopping for military customers through a combination of both national and private brand offerings, then both DeCA and the Company may be unable to achieve expected returns from this program, which could have a material adverse effect on the Company’s business. The success of the program will depend in part on factors beyond the Company’s control, including the actions of the Agency.

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 distribution operations, and to a lesser extent, retail grocery stores. Given the recent consolidation activity and limited number of potential acquisition targets within the food industry, the Company may not be able to identify suitable targets for acquisition and may make acquisitions which do not achieve the desired level of profitability or sales. Additionally, because the Company operates in the Food Distribution business, future acquisitions of retail grocery stores could result in the Company competing with its independent retailers 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 and this may adversely affect the Company’s ability to grow profitably.

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.

From time to time, the Company may advance funds, extend credit and lend money to certain independent retailers and guarantee loan or lease obligations of certain customers. The Company seeks to obtain security interest and other credit support in connection with these arrangements but the collateral may not be sufficient to cover the Company’s exposure. Greater than expected losses from existing or future credit extensions, loans, guarantee commitments or sublease arrangements could negatively and materially impact the Company’s operating results and financial condition.

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 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.

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

The Company has complex information technology (“IT”) systems that are important to its business operations. The Company gathers and stores sensitive information, including personal information about its customers, vendors and associates, and other proprietary or sensitive information. 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 or if the sensitive information stored is compromised by third parties.

Although the Company has implemented security programs and disaster recovery facilities and procedures, cyber threats evolve rapidly and are becoming more sophisticated. Despite the Company’s efforts to secure its information and systems, cyber attackers may defeat the security measures and compromise the personal information of customers, associates, vendors and other sensitive information. Associate error, faulty password management or other problems may compromise the security measures and result in a breach of the Company’s information systems, systems disruptions, data theft or other criminal activity. 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.

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

The Company’s business could be severely impacted by severe weather conditions, natural disasters, or other events that could affect the warehouse and transportation infrastructure used by the Company and its vendors to supply the Company’s corporate owned retail stores, and Food Distribution and Military customers. While the Company believes it has adopted commercially reasonable precautions, insurance programs, and contingency plans; the damage or destruction of Company facilities could compromise its ability to distribute products and generate sales. Unseasonable weather conditions that impact growing conditions and the availability of food could also adversely affect sales, profits and asset values.

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Impairment charges for goodwill or other long-lived 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 other long-lived tangible and 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 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 – for goodwill – 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 assets. This could result in the Company recording a non-cash impairment charge for 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 assets become impaired, the Company’s financial condition and results of operations may be adversely affected.

It may be difficult for the Company to attract and retain well-qualified associates, which would adversely affect the Company’s profitability and growth.

Recent low levels of unemployment have made it increasingly difficult to attract and retain qualified associates, and have caused upward pressure on wages. If the Company is unable to attract and retain quality associates to meet its needs, the Company could be required to increase its compensation offering, reduce staffing below optimal levels, or rely more on higher-cost third-party providers, which could adversely affect the Company’s profitability and growth. 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.

Legal, Regulatory and Legislative Risks

The Company’s Military segment is dependent upon domestic and international military operations. A change in the military commissary system, including its supply chain, or a change in the 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 locations of bases, or DeCA’s supply chain 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 a sequestration, may impact the level of funding to DeCA and could have a material impact on the Company’s operations. If DeCA were to make material changes to its supply chain model, for example by limiting distribution authorization, then the Company’s Military segment could be affected.

Product recalls or other 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.

The Company’s acquisition of Caito has expanded its food production capabilities and ability to offer fresh fruits and vegetables. The Company may need to recall such products if they become adulterated or if they are mislabeled, and the Company may be liable if the consumption of its products causes injury to consumers. A widespread product recall could result in significant losses due to the costs of a recall, the destruction of inventory, and lost sales. A significant product recall or product liability claim could also result in adverse publicity, damage to the Company’s reputation, and a loss of confidence in the safety and quality of its products.

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A number of the Company’s associates are covered by collective bargaining agreements, and unions may attempt to organize additional associates.

Approximately 29% and 12% of the Company’s associates in its Food Distribution and Military business segments, respectively, are covered by collective bargaining agreements (“CBAs”) which expire between January 2019 and February 2021. 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 CBAs, 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 CBAs, the Company may experience increased operating costs and an adverse impact on future results of operations.

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 CBAs 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 in critical and declining status, 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.

The Company also 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.

Item 1B. Unresolved Staff Comments

None.

Item 2.  Properties

The following table lists the locations and approximate square footage of the Company’s distribution centers used by its Food Distribution and Military segments as of December 30, 2017. The lease expiration dates for the distribution centers primarily servicing the Food Distribution segment range from February 2019 to July 2020, and for the Military segment range from August 2018 to January 2028. The Company believes that these facilities are generally well maintained and in good operating condition, have sufficient capacity, and are suitable and adequate to carry on its business for each of these segments.

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The following table lists the Company’s retail stores, including the adjacent fuel centers of the related stores, by retail banner, number of stores, location and approximate square footage under each banner as of December 30, 2017.

The Company also owns one fuel center that is not reflected in the retail square footage above: a Family Fare Quick Stop in Michigan that is not included with a corporate owned retail store but is adjacent to the Company’s corporate headquarters. Also not reflected in the retail square footage above is one stand-alone pharmacy located in Clear Lake, Iowa.

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 33,000 square feet in leased facilities. The Company also leases two additional off-site storage facilities consisting of approximately 50,300 square feet. The Company owns and leases to independent retailers seven stores totaling approximately 370,000 square feet and owns and leases to a third party one warehouse of approximately 400,000 square feet.

Item 3.   Legal Proceedings

From time-to-time, the Company is engaged 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. Additionally, 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 actions, lawsuits and claims 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. Legal proceedings, various lawsuits, claims, and other matters are more fully described in Note 9, Commitments and Contingencies, in the notes to consolidated financial statements, which is herein incorporated by reference.

Item 4.  Mine Safety Disclosure

Not Applicable

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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:

At February 23, 2018, there were approximately 1,300 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 SpartanNash common stock in each of the last three years:

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 and share repurchases, do not exceed $35.0 million. Additionally, the Company is generally permitted to pay cash dividends and repurchase shares in excess of $35.0 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, as defined in the senior revolving credit facility, before and after giving effect to the 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 (the “Board”) to declare future dividends. Each future dividend will be considered and declared by the Board at its discretion. Whether the Board 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 authorized a five-year share repurchase program for up to $50 million of SpartanNash’s common stock that expired in May 2016, after the completion of the 2016 repurchases. During the first quarter of 2016, the Board authorized a new five-year share repurchase program for an additional $50 million of SpartanNash’s common stock. During the fourth quarter of 2017, the Board authorized an incremental $50 million share repurchase program expiring in 2022. After the 2017 repurchases were made, $65.0 million remains available under these programs.

During 2017, 2016 and 2015, the Company repurchased 1,367,432; 396,030; and 282,363 shares of common stock for approximately $35.0 million, $9.0 million, and $9.0 million, respectively.

The equity compensation plans table in Part III, Item 12 of this report is herein incorporated by reference.

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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 30, 2013 and ending on December 30, 2017.

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:

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.

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Item 6.  Selected Financial Data

The following table provides selected historical consolidated financial information of SpartanNash for each of the five years and periods ended December 28, 2013 through December 30, 2017, all of which were 52 week years with the exception of 2014 which was a 53-week year and the 39-week transition year ended December 28, 2013.

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Historical data is not necessarily indicative of the Company’s future results of operations or financial condition. See discussion of “Risk Factors” in Part I, Item 1A of this report; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report; and the consolidated financial statements and notes thereto in Part II, Item 8 of this Annual Report on Form 10-K.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

About SpartanNash

SpartanNash, headquartered in Grand Rapids, Michigan, is a leading multi-regional grocery distributor and grocery retailer whose core businesses include distributing grocery products to independent grocery retailers (“independent retailers”), national retailers, its corporate owned retail stores, and U.S. military commissaries and exchanges. Through its Military segment, SpartanNash is a leading distributor of grocery products to military commissaries in the United States. The Company’s Retail segment operates neighborhood supermarkets that emphasize value beyond price, affordable wellness, commitment to local products and, as demonstrated throughout the organization, caring for their community and environment. The Company operates three reportable business segments: Food Distribution, Military and Retail.

The Company’s Food Distribution segment provides a wide variety of nationally branded and private brand grocery products and perishable food products to approximately 2,100 independent retailers, the Company’s corporate owned retail stores, food service distributors and various other customers. Through its Food Distribution segment, the Company also services national retailers, including Dollar General. Sales to Dollar General are made to more than 14,000 of its retail locations. The Food Distribution segment currently services customers in 47 states, primarily in the Midwest and Southeast regions of the United States.

The Company’s Military segment contracts with manufacturers to distribute a wide variety of grocery products, including dry groceries, beverages, meat, and frozen foods, primarily to military commissaries and exchanges located in the United States, the District of Columbia, Europe, Cuba, Puerto Rico, Italy, Bahrain, Djibouti and Egypt. The Company is also the DeCA exclusive worldwide supplier of private brand grocery and related products to U.S. military commissaries. The Company has over 40 years of experience acting as a distributor to U.S. military commissaries and exchanges.

The Company’s Retail segment operated 145 corporate owned retail stores in the Midwest region primarily under the banners of Family Fare Supermarkets, D&W Fresh Markets, VG’s Grocery, Dan’s Supermarket and Family Fresh Market as of December 30, 2017. The Company also offered pharmacy services in 87 of its corporate owned stores (of which 76 pharmacies are owned) and operated 31 fuel centers as of December 30, 2017. The retail stores have a “neighborhood market” strategy that focuses on value beyond price, affordable wellness, and commitment to local products.

The Company’s fiscal year end is the Saturday closest to December 31. The following discussion is as of and for the fiscal years ending or ended December 29, 2018 ("2018"), December 30, 2017 (“2017” or “current year”), December 31, 2016 (“2016” or “prior year”) and January 2, 2016 (“2015”), all of which include 52 weeks. All fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks and will generally include the Easter holiday. The fourth quarter includes the Thanksgiving and Christmas holidays, and depending on the fiscal year end, may include the New Year’s holiday.

In certain geographic areas, the Company’s sales and operating performance may vary with seasonality. Many 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.

Overview of 2017

In 2017, the Company continued to execute on its strategy to leverage its supply chain network to drive new and existing distribution business, invest in private brand offerings and customer convenience to provide a more differentiated product and service offering, and make targeted investments and strategic actions to enhance the Company’s retail store portfolio and overall profitability. Despite the challenging operating environment, the Company delivered against its initiatives, strengthened its foundation and core competencies, and has positioned itself for continued success.

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The Company’s 2017 accomplishments and developments include:

Food Distribution

Military

Retail

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Other

The accomplishments above helped position the Company for future earnings growth, but the competitive landscape and recent developments also present challenges to the Company and potential changes in trends that could impact 2018. For fiscal 2018, the Company anticipates year-over-year sales growth to continue in the Food Distribution segment driven primarily by incremental sales to high-growth customers as well as contributions from Caito’s Fresh Kitchen facility. New military commissary business in the Southwest, which will benefit sales comparisons for the first half of 2018, and contributions from the ongoing expansion of the DeCA private brand program should continue to drive sales growth in the Military segment. The Company expects that its Retail stores’ comparable sales will improve to slightly negative to flat by the end of the year as the stores benefit from the Company’s new positioning of its offerings. The sales outlook takes into consideration the impact of the new revenue recognition standard, which upon adoption in the first quarter of 2018 will reduce fiscal 2017 net sales by approximately $160 million as certain Food Distribution contracts that are currently reported on a gross basis will be reported on a net basis as the Company concluded that it does not control the goods or services prior to transfer to the customer. While the retail environment remains challenging, the Company is focused on capitalizing on its growth opportunities and leveraging its differentiated business model to drive sales and profitability. The Company continues to take actions that it believes will enhance the convenience and value that it provides its customers and continues to see positive results from these investments. To enhance this momentum, the Company intends to invest approximately 50% of its tax reform savings in its associates and programs designed to improve the Company’s competitive position.

Results of Operations

The following table sets forth items from the Company’s consolidated statements of operations as a percentage of net sales and the percentage change from the preceding year:

* Difference due to rounding

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Results of Continuing Operations for 2017 Compared to 2016

Net Sales

Net sales increased $393.5 million, or 5.1%, to $8.13 billion in 2017 from $7.73 billion in 2016. The increase in net sales was primarily attributable to contributions from the Caito acquisition, organic growth of 3.7% in the Food Distribution segment, new military commissary business in the Southwest in the second half of the year and increased contributions from the DeCA private brand program, partly offset by lower comparable sales at DeCA operated locations and lower sales at Retail resulting from the closure and sale of retail stores and a decrease in comparable store sales.

Food Distribution net sales, after intercompany eliminations, increased $537.7 million, or 15.6%, to $3.99 billion in 2017 from $3.45 billion in the prior year. The increase was primarily due to contributions from the Caito acquisition and organic growth of 3.7% related to incremental sales volume to existing customers.

Military net sales decreased $53.0 million, or 2.4%, to $2.14 billion in 2017 from $2.20 billion in the prior year. The decrease was primarily due to lower sales at the DeCA-operated commissaries, partially offset by new business in the Southwest and contributions from the DeCA private brand program.

Retail net sales decreased $91.2 million, or 4.4%, to $1.99 billion in 2017 from $2.08 billion in the prior year. The decrease in net sales was primarily attributable to $60.8 million of lower sales resulting from the closures and sales of retail stores as well as negative comparable store sales, partially offset by the impact of higher fuel prices. Comparable store sales for the year, excluding fuel, were negative 2.4% in both years. The Company defines a retail store as comparable when it is in operation for 14 accounting periods (a period equals four weeks), regardless of remodels, expansions, or relocated stores. The Company’s definition of comparable store sales may differ from similarly titled measures at other companies.

Gross Profit – Gross profit represents net sales less cost of sales, which is described in further detail within Note 1, Summary of Significant Accounting Policies and Basis of Presentation, in the notes to the consolidated financial statements. Gross profit increased $33.4 million, or 3.0%, to $1.14 billion in 2017 compared to $1.11 billion in the prior year. As a percent of net sales, gross profit decreased from 14.4% to 14.1% due to several factors, most notably the increased mix of Food Distribution sales as a percentage of total sales. The rate was also impacted by margin investments at both Retail and Food Distribution, the cycling of a significant prior year LIFO benefit and lower fuel margins, partially offset by higher margin rates in the Military segment.

Selling, General and Administrative Expenses – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancy costs, shipping and handling, utilities, equipment rental, depreciation (to the extent not included in Cost of Sales), out-bound freight and other administrative expenses. SG&A expenses increased $51.0 million, or 5.3%, to $1,014.7 million in 2017 from $963.7 million in the prior year, representing 12.5% of net sales in both years. The increase in SG&A expense was primarily attributable to higher operational expenses related to the Caito acquisition, increased healthcare costs and higher transportation and occupancy costs, partially offset by lower incentive compensation and other cost savings.

Merger/Acquisition and Integration Expenses – In 2017, $8.1 million of merger/acquisition and integration expenses were incurred mainly associated with the Caito and BRT acquisition, and to a lesser extent, other acquisition-related and ongoing merger activities. Prior year results included $7.0 million of merger/acquisition and integration expenses primarily associated with the Nash-Finch merger, particularly system upgrades and implementations, as well as costs incurred in connection with 2016 and 2015 acquisitions.

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Restructuring Charges and Asset Impairment, Including Goodwill Impairment – In 2017, $228.5 million of net restructuring and asset impairment charges were incurred, predominantly associated with goodwill and asset impairment charges. The Company recorded a non-cash goodwill impairment charge of $189.0 million related to the Retail segment. The impairment was driven by significantly lower than expected Retail operating results due to an increasingly competitive retail environment and the related pricing pressures that are anticipated to negatively impact gross margin, operating profit, and future cash flows. The Company also recorded $35.6 million of asset impairment and restructuring charges primarily associated with the underlying performance of Company’s retail store base and the execution of its store rationalization program. Prior year results included $32.1 million of restructuring and asset impairment charges that consisted primarily of impairment charges related to four underperforming retail stores and restructuring charges primarily related to three retail stores and two food distribution centers. The facilities were closed as part of the Company’s retail store and warehouse rationalization plan.

Operating Earnings (Loss)

The Company reported an operating loss of ($106.3) million in 2017 compared to operating earnings of $108.8 million in the prior year. The decrease of $215.1 million was primarily attributable to current year non-cash goodwill and asset impairment charges of $222.7 million, predominantly related to the Retail segment, higher costs associated with Caito operations and Fresh Kitchen start-up activities, as well as increased LIFO and health care expenses, partly offset by lower incentive compensation expense and various cost savings initiatives.

Food Distribution operating earnings decreased $1.8 million, or 2.1%, to $83.3 million in 2017 from $85.1 million in the prior year. The decrease was primarily attributable to Caito operations and Fresh Kitchen start-up activities and higher LIFO expense, partially offset by net sales growth from new and existing customers, lower incentive compensation and lower operating expenses associated with various cost savings initiatives.

Military operating earnings decreased $5.1 million to $7.0 million in 2017 from $12.2 million in the prior year. The decrease was primarily due to lower sales at the DeCA-operated commissaries, higher supply chain costs associated with industry-wide transportation cost challenges, onboarding and ramping up new and high-growth lines of business and increased healthcare and LIFO expense, partially offset by growth from the new military commissary business in the Southwest and the DeCA private brand program, as well as lower incentive compensation and margin improvements.

Retail reported an operating loss of ($196.6) million in 2017 compared to operating earnings of $11.5 million in the prior year. The decrease was primarily due to goodwill and higher asset impairment charges, lower comparable store sales, investments in margin and store labor, and higher occupancy and healthcare costs, partly offset by lower costs related to incentive compensation, depreciation, merger/acquisition and integration and closed stores.

Interest Expense – Interest expense increased $6.2 million, or 32.8%, to $25.3 million in 2017 from $19.1 million in the prior year primarily due to increased borrowings related to the Caito and BRT acquisition and the timing of working capital requirements.

Debt Extinguishment – A loss on debt extinguishment of $0.4 million was incurred in 2017 in connection with the pay down of the term loan component of the senior secured credit facility. A loss on debt extinguishment of $0.2 million was incurred in 2016 in connection with the amendment of the senior secured credit facility.

Income Taxes – The effective income tax rates were 60.0% and 36.6% for 2017 and 2016, respectively. In the fourth quarter of 2017, the Company re-measured its deferred tax assets and liabilities to reflect a change in the federal statutory rate from 35% to 21%, effective January 1, 2018, resulting from the Tax Act that was enacted on December 22, 2017. As a result, the Company realized a provisional deferred income tax benefit of $26.0 million. The Company’s 2018 tax provision will be recorded at an effective rate that contemplates the new lower statutory rate, and is currently anticipated to be between 23% and 24%, depending on levels of profitability overall and between jurisdictions. Refer to Note 13, Income Tax, within the notes to the consolidated financial statements for additional information regarding the Tax Act.

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Differences from the federal statutory rate are primarily due to the re-measurement of deferred taxes mentioned previously, state taxes, tax benefits related to stock-based compensation and charitable product donations in the current year and state taxes in the prior year. The Company’s effective tax rate was impacted by the stock-based compensation benefits recognized resulting from the adoption of ASU 2016-09. The tax impacts of stock-based compensation are primarily generated in the first quarter due to the timing of awards and vesting schedules.

Results of Continuing Operations for 2016 Compared to 2015

Net Sales

Net sales for 2016 increased $82.6 million, or 1.1%, to $7.73 billion from $7.65 billion in 2015. The increase was primarily driven by business gains from new and existing customers in the Food Distribution and Military segments, which more than offset the negative impact of food deflation on all segments; lower sales at the DeCA-operated commissaries; and lower sales attributable to both the decrease in comparable retail store sales and the closure of retail stores.

Food Distribution net sales, after intercompany eliminations, increased $149.4 million, or 4.5%, to $3.45 billion in 2016 from $3.31 billion in 2015. The increase was primarily due to business gains from new and existing customers, which more than offset the negative impact of deflation.

Military net sales decreased $10.1 million, or 0.5%, to $2.20 billion in 2016 from $2.21 billion in 2015. The decrease was primarily due to lower sales at the DeCA-operated commissaries, partially offset by new business gains associated with the distribution of fresh products.

Retail net sales decreased $56.7 million, or 2.6%, to $2.08 billion in 2016 from $2.14 billion in 2015. Comparable store sales for the year, excluding fuel, improved to -2.4 percent from -2.9 percent in 2015. Despite four consecutive quarters of improved comparable store sales trends over the course of fiscal 2016, the ongoing deflationary environment and continued challenging economic conditions, particularly in certain western geographies, contributed to the lower sales at Retail. Specifically, the decrease in net sales was attributable to the negative comparable store sales and $40.0 million of lower sales due to the closure of retail stores and a fuel center, partially offset by $40.0 million of full-year net sales contributions from stores acquired in 2015. The Company defines a retail store as comparable when it is in operation for 14 accounting periods (a period equals four weeks), regardless of remodels, expansions, or relocated stores. The Company’s definition of comparable store sales may differ from similarly titled measures at other companies.

Gross Profit – Gross profit represents net sales less cost of sales, which is described in further detail within Note 1, Summary of Significant Accounting Policies and Basis of Presentation, in the notes to the consolidated financial statements. Gross profit for 2016 was $1.11 billion compared to $1.12 billion in 2015. As a percent of net sales, gross profit decreased from 14.6% to 14.4% primarily due to the mix of business operations and the impact of continued deflation.

Selling, General and Administrative Expenses – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancy costs, shipping and handling, utilities, equipment rental, depreciation (to the extent not included in Cost of Sales), out-bound freight and other administrative expenses.

SG&A expenses decreased $11.9 million, or 0.4%, to $963.7 million in 2016 from $975.6 million in 2015, and were 12.5% of net sales in 2016 compared to 12.8% in 2015. The decrease was due primarily to benefits from merger synergies and cost reduction efforts, lower depreciation associated with fully depreciated assets, and the impact of retail store closures, partially offset by higher health care and other benefit costs. The decrease in the rate to net sales was primarily due to the factors mentioned previously.

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Merger/Acquisition and Integration Expenses – Merger integration and acquisition expenses consist of costs to integrate operations following the merger with Nash-Finch as well as costs incurred in connection with 2016 and 2015 acquisitions. Merger integration and acquisition expenses decreased in 2016 as a result of completing various merger integration activities and despite acquisition-related costs associated with the Caito and BRT acquisition.

Restructuring Charges and Asset Impairment – In 2016, $32.1 million in charges were recognized primarily related to the closure of four retail stores and two distribution centers, which were part of the Company’s warehouse and retail store rationalization plan, as well as asset impairment charges associated with certain underperforming retail stores. In 2015, charges of $8.8 million were recognized related to the closures of six retail stores and one distribution center, as well as asset impairment charges associated with certain underperforming retail stores.

Operating Earnings

Operating earnings decreased $14.1 million, or 11.5%, to $108.8 million in 2016 from $122.9 million in 2015. The decrease was primarily due to higher restructuring and asset impairment charges of $23.3 million and the impact of food deflation, which more than offset the sales growth at Food Distribution and lower operating expenses due in part to lower depreciation and productivity and efficiency initiatives.

Food Distribution operating earnings increased $6.3 million, or 7.9%, to $85.1 million in 2016 from $78.8 million in 2015. The increase was driven by sales growth from new and existing business, and lower operating expenses associated with supply chain improvements and lower depreciation, partially offset by higher costs for warehouse closings and health care benefits, as well as the negative impact of deflation.

Military operating earnings decreased $4.9 million, or 28.7%, to $12.2 million in 2016 from $17.1 million in 2015. The decrease was primarily due to lower sales at the DeCA-operated commissaries and the negative impact of deflation, which more than offset new business gains associated with the distribution of fresh products as well as lower restructuring and asset impairment charges that did not recur in 2016.

Retail operating earnings decreased $15.5 million, or 57.4%, to $11.5 million in 2016 from $27.0 million in 2015. The decrease was primarily due to higher restructuring and impairment charges and a decrease in comparable stores sales, partially offset by favorable rebate programs, higher fuel margins, and lower occupancy costs.

Interest Expense – Interest expense decreased $2.7 million, or 12.5%, to $19.1 million in 2016 from $21.8 million in 2015. The decrease in interest expense was primarily due to lower debt levels and lower interest rates primarily due the prepayment of $50.0 million of Senior Notes in 2015.

Debt Extinguishment – A loss on debt extinguishment of $0.2 million was incurred in 2016 in connection with the amendment of the senior secured credit facility. A loss of debt extinguishment of $1.2 million was incurred in 2015 in connection with the prepayment of the Senior Notes (see Debt Management under “Liquidity and Capital Resources”).

Income Taxes – The effective income tax rates were 36.6% and 37.0% for 2016 and 2015, respectively. The difference from the federal statutory rate in both 2016 and 2015 were primarily due to state income taxes.

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, the Company also provides information regarding adjusted operating earnings, adjusted earnings from continuing operations, and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“adjusted EBITDA”). These are non-GAAP financial measures, as defined below, and are used by management to allocate resources, assess performance against its peers and evaluate overall performance. The Company believes these measures provide useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its financial results in these adjusted formats.

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Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude start-up costs associated with the new Fresh Kitchen operation, expenses (incentive compensation and professional fees) associated with tax planning strategies related to the 2017 Tax Cuts and Jobs Act, and an executive retirement stock compensation award. The Fresh Kitchen is a newly constructed facility that provides the Company with the ability to process, cook, and package fresh protein-based foods and complete meal solutions. Given the Fresh Kitchen represents a new line of business for the Company, the start-up activities associated with testing, training, and preparing the Fresh Kitchen for production, as well as incorporating the related operations into the business, are considered “non-operational” or “non-core” in nature. The Tax Cuts and Jobs Act was enacted in 2017 and resulted in a significant tax benefit to the Company due to the re-measurement of deferred taxes. The Company also incurred expenses related to tax planning strategies aimed at maximizing the tax benefit associated with the change in federal tax legislation. These items are not expected to recur in the foreseeable future and are considered “non-operational” or “non-core” in nature. The retirement stock compensation award represents incremental compensation expense in connection with an executive retirement that is also considered “non-operational” or “non-core” in nature.

Adjusted Operating Earnings

Adjusted operating earnings is a non-GAAP operating financial measure that the Company defines as operating earnings plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.

The Company believes that adjusted operating earnings provide a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers adjusted operating earnings as an additional way to measure operating performance on an ongoing basis. Adjusted operating earnings is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted operating earnings and adjusted operating earnings by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in an adjusted operating earnings format.

Adjusted operating earnings and adjusted operating earnings by segment are not measures of performance under accounting principles generally accepted in the United States of America (“GAAP”), and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definitions of adjusted operating earnings and adjusted operating earnings by segment may not be identical to similarly titled measures reported by other companies.

Following is a reconciliation of operating (loss) earnings to adjusted operating earnings for 2017, 2016 and 2015.

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