Note 2 – Merger and Acquisitions

On June 16, 2015, SpartanNash acquired certain assets and assumed certain liabilities of Dan’s Super Market, Inc. (Dan’s) for a total purchase price of $32.6 million, which included inventory of $3.7 million. The results of operations of the Dan’s acquisition are included in the accompanying financial statements from the date of acquisition. Dan’s is a six-store chain serving Bismarck and Mandan, North Dakota, and was not a customer of the SpartanNash Food Distribution segment prior to the acquisition. The Company acquired the Dan’s stores to strengthen its offering in this region from both a retail and distribution perspective. The purchased assets include inventory, equipment, trade name, favorable lease, non-compete agreements, and goodwill. The acquired assets and assumed liabilities were recorded at their estimated fair values as of the acquisition date and were based on preliminary estimates that may be subject to further adjustments within the measurement period. Goodwill of $24.6 million and $1.0 million was preliminarily assigned to the Retail and Food Distribution segments, respectively. The Company evaluated the acquired set of assets and activities, consisting primarily of long-lived assets and operational processes, and determined they represent inputs and processes that constitute a business.

On November 19, 2013, Spartan Stores completed a merger with 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:

The following table summarizes the ending fair values of the assets acquired and liabilities assumed on November 19, 2013.

(In thousands)	Fair Value
Current assets	$	787,430
Property and equipment	346,500
Goodwill	36,622
Intangible assets	28,550
Other	38,160
Total assets acquired	1,237,262
Current liabilities	342,221
Other long-term liabilities	76,531
Long-term debt and capital lease obligations	438,896
Total liabilities assumed	857,648
Net assets acquired	$	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 concluded that the purchase accounting effect of the revisions was not material to the consolidated financial statements for any period presented. As a result of the revisions, property and equipment decreased by $23.0 million, while intangible assets and goodwill increased by $19.3 million and $3.7 million, respectively.

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 valued and assigned useful lives 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 operating results of Nash-Finch are included in the consolidated results of operations beginning on November 19, 2013. The following table provides net sales and results of operations from the acquired Nash-Finch Company included in the consolidated statements of earnings for the 39-week period ended December 28, 2013 as well as unaudited supplemental pro forma financial information as if Nash-Finch was acquired on the first day of the same 39-week period.

(In thousands)

Period Ended
December 28, 2013

(Pro Forma)(A)

Period Ended
December 28, 2013

(Reported)(B)

Net sales

5,896,555

563,185

Net earnings

24,073

769

(A) 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.

(B) Included in net earnings above are the following after-tax charges: merger and integration expenses of $2.0 million; asset impairment and restructuring charges of $0.4 million; and a loss on debt extinguishment of $2.6 million. 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 loss on debt extinguishment. Costs associated with the new revolving credit agreement of $9.4 million were capitalized and included in “Other assets, net” in the consolidated balance sheets.

(In thousands, except share price)

Spartan Stores common shares issued and deferred

Trading price

Fair value of shares issued

Cash paid for fractional shares