Annual Report 2013 2013 SpartanNash Annual Report Financial Highlights ADJUSTED Our transition fiscal NET SALES ADJUSTED EBITDA OPERATING EARNINGS year 2013 ranked (IN BILLIONS) (IN MILLIONS) (IN MILLIONS) 2 $2.63 $2.61 $2.60 $2.55 $2.53 among the most $107 $106 $65 $65 $65 $103 $104 $63 exciting times in our $97 $57 company’s history $2.022 as we completed $76 a transformative $42 merger with the Nash Finch Company. The combination of Spartan Stores’ strong retail and grocery distribution operations, March March March March Jan. Dec. March March March March Jan. Dec. March March March March Jan. Dec. together with Nash 2010 2011 20121 2013 20131 20131 2010 2011 20121 2013 20131 20131 2010 2011 20121 2013 20131 20131 Finch’s industry The adjusted financial information presented reflects non GAAP financial measures. Please see pages 33-37 and 47 of the enclosed Form 10-K for the respective reconciliations of these measures. leading position in (Dollars in millions, except per share data and percentage data) Year Ended 40 Weeks1 39 Weeks1 grocery distribution to 2010 2011 20121 2013 01/05/2013 12/28/2013 Net sales $ 2,552 $ 2,533 $ 2,6342 $ 2,608 $ 2,0152 $ 2,597 military commissaries Gross profit margin 21.9% 21.8% 21.1% 20.9% 20.5% 18.7% Adjusted operating earnings 65 65 65 63 42 57 and exchanges and Adjusted earnings 30 31 32 31 20 30 from continuing operations its comprehensive Adjusted diluted earnings 1.32 1.36 1.39 1.43 0.94 1.23 per share from continuing operations wholesale grocery Adjusted EBITDA 103 104 107 106 76 97 network throughout Cash from operating activities 92 90 94 59 27 65 Total net long term debt 176 131 112 144 162 596 the U.S., has resulted 1The year ended December 28, 2013 was a transition year consisting of 39 weeks due to the change in our fiscal year end from the last Saturday in March to the Saturday closest to December 31. The comparative period ended January 5, in a $7.5 billion 2013 includes a 40th week of operations. The year ended March 31, 2012 includes a 53rd week of operations. 2Fiscal March 31, 2012 includes a 53rd week of sales totaling $49.8 million. The 40-week period ended January 5, 2013 revenue company includes $46.1 million of sales for the 40th week. with 21 wholesale Corporate Statistics March March March March December distribution centers 2010 2011 2012 2013 2013 Stores 96 97 96 101 172 covering 44 states and Fuel centers 24 25 27 30 34 Pharmacies 66 67 66 67 92 172 corporate-owned Food Distribution customer locations (approximate) 360 380 380 390 1,900 supermarkets. Private brand items (approximate) 3,200 3,500 3,900 4,200 8,600 Military Commissaries Served - - - - 174 OurFamily FareCorporate Supermarkets, Banners D&W (Minnesota and Wisconsin); Family •Our Our Family Private Brands• Spartan Fresh Market, Glen’s Markets, VG’s Thrift Center (South Dakota); No • me too! • Spartan Fresh Selections Food and Pharmacy, Valu Land, and Frills Supermarkets & Bag’n Save • Nash Brothers Trading • TopCare Forest Hills Foods (all Michigan), (Nebraska and Iowa); Sun Mart Foods Company • b-leve Econofoods (Minnesota, Wiscon sin, (Colorado, Minnesota, Nebraska, • IGA • Full Circle North Dakota); Family Fresh Market North Dakota). • Piggly Wiggly • Valu Time • PAWS Premium • World Classics LETTER TO OUR SHAREHOLDERS Our transition fiscal year 2013 ranked among the most exciting times in our company’s history. As we completed a transformative merger with the Nash Finch Company (“Nash Finch”), we brought together two highly complementary organizations to form a leader in the grocery wholesale, retail and military commissary exchange channels. We will have significant scale and geographic reach to provide value-added distribution services to a diversified customer base and to drive new growth opportunities through increased customer penetration, new customer additions and expansion into Craig C. Sturken Dennis Eidson new market segments. Chairman President and Chief Executive Officer With the completion of the merger in November 2013, we began operating under the name SpartanNash Company, which represents the combination of our two companies’ capabilities and our shared passion for integrity, teamwork and dedication to the customers we serve. We are pleased to say that this now includes serving our military heroes and their families at home in the U.S. and abroad. By combining our resources, expertise and talent, we have strengthened our business and positioned the Company to better compete in the evolving grocery industry. The combination of Spartan Stores’ strong retail and grocery distribution operations together with Nash Finch’s industry leading position in grocery distribution to military commissaries and exchanges and its comprehensive wholesale grocery network throughout the U.S. has resulted in a $7.5 billion revenue company with 21 wholesale distribution centers covering 44 states and 172 corporate-owned supermarkets. We thank all of our stakeholders, including our associates, customers and suppliers, for their support in completing this significant achievement. In conjunction with the merger, our Company also changed its fiscal year end to the Saturday closest to December 31. This change resulted in a shortened reporting period of 39 weeks, referred to as our transition fiscal year 2013. Nash Finch results are included from the date of merger. Our consolidated net sales increased 31.9% to $2.60 billion, including $563.2 million in sales generated as a result of the recent merger with Nash Finch, for the 39-week transition fiscal year ended December 28, 2013 when compared to the comparable 39-week period last year. We posted adjusted diluted earnings per share from continuing operations of $1.23 for transition fiscal year 2013, compared with $0.94 for the comparable period last year. We believe this performance demonstrates our team’s continued efforts to provide a strong value proposition to our retail and distribution customers, as well as our disciplined expense management. BUSINESS SEGMENTS We are proud of our accomplishments related to the merger and the performance of our legacy business and pleased with the opportunities created as a result of the merger. In transition fiscal year 2013, our legacy retail and distribution segments benefited from our continued ability to drive new customer gains, a single-store acquisition, the increased traction of our yes Rewards loyalty program and higher fuel sales. Looking ahead, we are excited about our prospects, in particular, the opportunity to operate three highly complementary and balanced business segments: military, food distribution and retail. In our legacy distribution business, we remain focused on enhancing our value-added service offerings to our customers and improving efficiency and service levels in our warehouse operations. By the end of the year, we had completed the implementation of six automated guided vehicles to perform certain storage tasks at our distribution center in Grand Rapids, Michigan. While we are in the early stages of this project, we anticipate that this greater use of automation will help increase our productivity and allow us to continue to offer a highly competitive cost of goods to our customers. Additionally, following the end of the year, we consolidated the operations of two warehouse facilities in Ohio. We expect this to result in improved service to our customer base as we increase the product assortment and turns, as well as improved operational efficiencies. As a larger organization, we look forward to maximizing our efficiencies and continuing to provide SpartanNash’s distribution customers with market-leading products and best-in-class services. In our retail business segment, we continued to make strategic investments in our legacy store base, pricing and promotion and private brand product offering. During transition fiscal year 2013, we completed one major remodel and many minor remodels. We also acquired two stores in North Dakota post-merger and closed seven underperforming supermarkets, ending the transition fiscal year 2013 with 172 stores and 34 fuel centers. We continued to refine our yes Rewards program and leverage our pharmacy and fuel offerings as value-added rewards for consumers in our legacy retail operations. Our Spartan Stores legacy pharmacies posted a 2.5% increase in comparable script count, which is a testament to the value and convenience that our programs provide. We are excited about the opportunity to introduce certain elements of our loyalty, pharmacy and fuel programs at the stores gained in the merger with Nash Finch over the next several years as we complete our remodel, technology conversion and remerchandising efforts. Currently, none of these new 77 retail locations have a rewards program and we believe there is meaningful potential to further engage the consumer and encourage brand loyalty. On the product side, we continue to expand our legacy private brand program for both our distribution and retail customers. In transition fiscal year 2013, we launched approximately 100 new legacy private brand items and we added approximately 3,900 private brand items to our portfolio through the merger with Nash Finch. We ended the year with approximately 8,600 items in our private brands program which includes the Spartan® and Our Family® brands. As a result of the merger with Nash Finch, we have a military distribution segment that, in partnership with Coastal Pacific Food Distributors, offers the only worldwide distribution network with the ability to deliver to all military commissaries and associated exchanges across the globe. We are proud to serve our nations military heroes and their families at home and abroad. OUTLOOK While there is much work to do and there are many challenges ahead, we are enthusiastic about the potential for SpartanNash to leverage our powerful new platform with its broader customer base and geographic reach across multiple food retail and distribution businesses to create significant long-term value for our shareholders.