Note 2

Merger

On November 19, 2013, Spartan Stores completed a merger with Nash-Finch Company (“Nash-Finch”), a food distribution company serving military commissaries and exchanges and independent grocery retailers and an operator of retail grocery stores. The merger was pursued to create a larger, more balanced company with a broader customer base across multiple food retail and distribution businesses.

Each outstanding share of the common stock of Nash-Finch converted into 1.20 shares of Spartan Stores common stock.

Consideration paid for all of the Nash-Finch outstanding shares consisted of the following:

(In thousands, except share price)
Spartan Stores common shares issued and deferred		16,119
Trading price	$	23.55
Fair value of shares issued		379,600
Cash paid for fractional shares		14
	$	379,614

The merger was accounted for under the provisions of FASB Accounting Standards Codification Topic 805, “Business Combinations.” The related assets acquired and liabilities assumed were recorded at estimated fair value on the acquisition date. The operating results of Nash-Finch are included in the consolidated results of operations beginning on November 19, 2013.

The following table summarizes the fair values of the assets acquired and liabilities assumed on November 19, 2013. During the measurement period, which ended on November 18, 2014, net adjustments of $7.0 million were made to the fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. These adjustments are summarized in the table presented below. The accompanying consolidated balance sheet as of December 28, 2013 has been retrospectively adjusted to reflect these adjustments made as of November 19, 2013 as required by the accounting guidance for business combinations.

(In thousands)	Initial Valuation		2014 Adjustments to Fair Value			Final Valuation
Current assets	$	790,296	$	(2,866	)	$	787,430
Property and equipment		369,495	(22,995		)	346,500
Goodwill		43,584	(6,962		)	36,622
Intangible assets		10,750	17,800			28,550
Other		38,160	-			38,160
Total assets acquired		1,252,285	(15,023		)	1,237,262
Current liabilities		353,484	(11,263		)	342,221
Other long-term liabilities		81,047	(4,516		)	76,531
Long-term debt and capital lease obligations		438,140	756			438,896
Total liabilities assumed		872,671	(15,023		)	857,648
Net assets acquired	$	379,614	$	-		$	379,614

During the second quarter ended July 12, 2014, management of the Company made revisions to the cash flow projections to correct the allocation between certain reporting units related to the valuation analysis completed in 2013. Management has concluded that the purchase accounting effect of the revisions is not material to the consolidated financial statements for any period presented. As a result of the revisions, property and equipment was decreased by $23.0 million, while intangible assets were increased by $19.3 million and goodwill was increased by $3.7 million.

The excess of the purchase price over the fair value of net assets acquired of $36.6 million was recorded as goodwill in the consolidated balance sheet and allocated to the Food Distribution segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Nash-Finch. No goodwill is expected to be deductible for tax purposes.

Intangible assets acquired were preliminarily valued as follows:

(In thousands)	Intangible Assets		Useful Life
Trade names	$	6,700		Indefinite
Customer lists		5,100		7 years
Customer relationships		12,100		20 years
Favorable leases		4,650		7 to 22 years
	$	28,550

The following table provides net sales and results of operations from the acquired Nash-Finch Company included in the consolidated statements of earnings since November 19, 2013:

(In thousands)	Year Ended January 5, 2015		Period Ended December 28, 2013
Net sales	$	5,248,617	$	563,185
Net earnings		24,731		769

Included in the net earnings above are merger and integration expenses of $2.6 million and $2.0 million after-tax for the year ended January 3, 2015 and the period ended December 28, 2013, respectively; asset impairment and restructuring charges of $2.9 million and $0.4 million after-tax for the year ended January 5, 2015 and the period ended December 28, 2013, respectively; and debt extinguishment charges of $2.6 million after-tax for the period ended December 28, 2013..

The following unaudited supplemental pro forma financial information presents sales and net earnings as if the Nash-Finch Company was acquired on the first day of the fiscal year ended March 30, 2013.

This pro forma information is not necessarily indicative of the results that would have been obtained if the acquisition had occurred at the beginning of the period presented or that may be obtained in the future.


(In thousands)	Period Ended December 28, 2013 (39 weeks)		Year Ended March 30, 2013 (52 weeks)
Net sales	$	5,896,555	$	7,428,957
Net earnings (loss)		24,073		(73,340	)

Non-recurring merger transaction and integration costs of $26.5 million were incurred during the 39 week period ended December 28, 2013 of which $21.0 million was included in selling, general and administrative expenses and $5.5 million was included in debt extinguishment charges. Costs associated with the new revolving credit agreement of $9.4 million were capitalized and included in other assets in the Consolidated Balance Sheet.