Note 17 – Reporting Segment Information

SpartanNash sells and distributes products that are typically found in supermarkets and discount stores. The operating segments reflect the manner in which the business is managed and how the Company allocates resources and assesses performance internally. The Company’s chief operating decision maker is the Chief Executive Officer, who determines the allocation of resources and, through a regular review of financial information, assesses the performance of the operating segments. The business is classified by management into three reportable segments: Food Distribution, Military and Retail. These reportable segments are three distinct businesses, each with a different customer base, management structure, and basis for determining budgets, forecasts, and executive compensation. The Company reviews its reportable segments on an annual basis, or more frequently if events or circumstances indicate a change in reportable segments has occurred.

The Company’s Food Distribution segment, consisting of 13 distribution centers as well as facilities to process fresh produce, proteins, and meal kits, supplies grocery 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 primarily to a diverse group of independent retailers, national retailers, food service distributors and the Company’s corporate owned retail stores. The Company also offers certain back office services (e.g., accounting, payroll, marketing, etc.) to its independent retail customers. These services are not material to the Company’s financial statements. Sales to independent retailers and inter-segment sales are recorded based upon both a “cost plus” model and a “variable mark-up” model, which vary by commodity and servicing distribution center. To supply its wholesale customers, the Company operates a fleet of tractors, conventional trailers and refrigerated trailers and also provides managed freight solutions.

The 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 from its 7 distribution centers, two of which are shared with the Food Distribution segment. The contracts typically specify the commissaries and exchanges to supply on behalf of the manufacturer, the manufacturer’s products to be supplied, service and delivery requirements and pricing and payment terms. The Company is also the DeCA exclusive worldwide supplier of private brand grocery and related products to U.S. military commissaries. 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 partners with Coastal Pacific Food Distributors to deliver the products on its behalf.

The Retail segment operated 145 corporate owned retail stores and 31 fuel centers, predominantly in the Midwest region, as of December 30, 2017. The Company’s retail stores typically offer dry groceries, produce, dairy products, meat, delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products and health and beauty care products. The Company also offered pharmacy services in 87 of its corporate owned retail stores as of December 30, 2017.

Identifiable assets represent total assets directly associated with the reporting segments. Eliminations in assets identified to segments include intercompany receivables, payables and investments.

The following tables set forth information about the Company by reporting segment:

	Food
(In thousands)	Distribution			Military			Retail			Total
2017
Net sales to external customers	$	3,992,192		$	2,144,022		$	1,991,868		$	8,128,082
Inter-segment sales		885,872			—			—			885,872
Merger/acquisition and integration		6,244			1,522			335			8,101
Goodwill impairment		—			—			189,027			189,027
Restructuring charges and asset impairment		1,317			500			37,615			39,432
Depreciation and amortization		30,255			11,626			41,359			83,240
Operating earnings (loss)		83,296			7,014			(196,626	)		(106,316	)
Capital expenditures		25,990			6,482			38,434			70,906

2016
Net sales to external customers	$	3,454,541		$	2,197,014		$	2,083,045		$	7,734,600
Inter-segment sales		918,095			—			—			918,095
Merger/acquisition and integration		3,703			1			3,255			6,959
Restructuring charges (gains) and asset impairment		5,068			(473	)		27,521			32,116
Depreciation and amortization		21,397			11,484			44,365			77,246
Operating earnings		85,093			12,160			11,514			108,767
Capital expenditures		19,075			6,447			47,907			73,429

2015
Net sales to external customers	$	3,305,094		$	2,207,161		$	2,139,718		$	7,651,973
Inter-segment sales		973,512			—			—			973,512
Merger/acquisition and integration		2,037			—			6,396			8,433
Restructuring (gains) charges and asset impairment		(216	)		1,048			7,970			8,802
Depreciation and amortization		26,127			12,081			45,126			83,334
Operating earnings		78,841			17,059			26,975			122,875
Capital expenditures		17,967			3,768			57,659			79,394

							December 30,			December 31,
(In thousands)							2017			2016
Total Assets
Food Distribution							$	1,085,621		$	776,725
Military								432,818			395,737
Retail								533,912			754,625
Discontinued operations								3,446			3,249
Total							$	2,055,797		$	1,930,336

The Company offers a wide variety of grocery products, general merchandise and health and beauty care, pharmacy, fuel, and other items and services. The following table presents sales by type of similar product and services:

(In thousands, except percentages)	2017				2016				2015
Center store (a)	$	4,877,289	60.0	%	$	4,908,142	63.5	%	$	4,845,763	63.3	%
Fresh (b)		2,771,942	34.1			2,359,829	30.5			2,373,829	31.0
Pharmacy		352,177	4.3			356,010	4.6			310,377	4.1
Fuel		126,674	1.6			110,619	1.4			122,004	1.6
Consolidated net sales	$	8,128,082	100.0	%	$	7,734,600	100.0	%	$	7,651,973	100.0	%

(a)

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

(b)

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