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Summary of Significant Accounting Policies and Basis of Presentation | 12 Months Ended
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Dec. 29, 2018
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies and Basis of Presentation | Note 1 – Summary of Significant Accounting Policies and Basis of Presentation Principles of Consolidation: The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SpartanNash Company and its subsidiaries (“SpartanNash” or “the Company”). Intercompany accounts and transactions have been eliminated. Fiscal Year: The Company’s fiscal year end is the Saturday nearest to December 31. The following discussion is as of and for the fiscal years ending or ended December 28, 2019 (“2019”), December 29, 2018 ("2018" or “current year”), December 30, 2017 (“2017” or “prior year”) and December 31, 2016 (“2016”), all of which include 52 weeks. All fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods might differ from those estimates. Revenue Recognition: The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods and services to a customer, in an amount that reflects the consideration that it expects to receive in exchange for those goods or services. This is achieved through applying the following five-step model:
| • | Identification of the contract, or contracts, with a customer
| • | Identification of the performance obligations in the contract
| • | Determination of the transaction price
| • | Allocation of the transaction price to the performance obligations in the contract
| • | Recognition of revenue when, or as, the Company satisfies a performance obligation
The Company generates substantially all of its revenue from contracts with customers, whether formal or implied. Sales taxes collected from customers are remitted to the appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers itself a pass-through conduit for collecting and remitting sales taxes, with the exception of taxes assessed during the procurement process of select inventories. Greater than 99% of the Company’s revenues are recognized at a point in time. Revenues from product sales are recognized when control of the goods is transferred to the customer, which occurs at a point in time, typically upon delivery or shipment to the customer, depending on shipping terms, or upon customer check-out in a corporate owned retail store. Freight revenues are also recognized upon delivery, at a point in time. Other revenues, including revenues from value-added services, are recognized as earned, over a period of time. All of the Company’s revenues are domestic, as the Company has no performance obligations on international shipments subsequent to delivery to the domestic port. The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) with respect to each contract with customers. Based upon the nature of the products the Company sells, its customers have limited rights of return which are immaterial. Discounts provided by the Company to customers at the time of sale are recognized as a reduction in sales as the products are sold. Certain contracts include rebates and other forms of variable consideration, including up-front rebates, rebates in arrears, rebatable incentives, flex funds, and product incentives, which may have tiered structures based on purchase volumes and which are accounted for as variable consideration. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Cost of Sales: Cost of sales represents the cost of inventory sold during the period, which for all non-production operations includes purchase costs, in-bound freight, physical inventory adjustments, markdowns and promotional allowances and excludes warehousing costs, depreciation and other administrative expenses. For the Company’s food processing operations, cost of sales includes direct product and production costs, inbound freight, purchasing and receiving costs, utilities, depreciation, and other indirect production costs and excludes out-bound freight and other administrative expenses. As a result, the Company’s cost of sales and gross profit may not be identical to similarly titled measures reported by other companies. Vendor allowances and credits that relate to the Company’s buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for the Company’s merchandising costs such as setting up warehouse infrastructure. Vendor allowances are recognized as a reduction in cost of sales when the related product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms. The distribution segments include shipping and handling costs in the selling, general and administrative section of operating expenses on the consolidated statement of operations. Cash and Cash Equivalents: Cash and cash equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase. Accounts and Notes Receivable: Accounts and notes receivable are shown net of allowances for credit losses of $4.3 million and $2.0 million as of December 29, 2018 and December 30, 2017, respectively. The Company evaluates the adequacy of its allowances by analyzing the aging of receivables, customer financial condition, historical collection experience, the value of collateral and other economic and industry factors. Actual collections may differ from historical experience, and if economic, business or customer conditions deteriorate significantly, adjustments to these reserves may be required. When the Company becomes aware of factors that indicate a change in a specific customer’s ability to meet its financial obligations, the Company records a specific reserve for credit losses. Operating results include bad debt expense of $3.4 million, $1.5 million and $1.4 million for 2018, 2017 and 2016, respectively. Inventory Valuation: Inventories are valued at the lower of cost or market. Approximately 88.9% and 86.9% of the Company’s inventories were valued on the last-in, first-out (LIFO) method at December 29, 2018 and December 30, 2017, respectively. If replacement cost had been used, inventories would have been $55.1 million and $50.4 million higher at December 29, 2018 and December 30, 2017, respectively. The replacement cost method utilizes the most current unit purchase cost to calculate the value of inventories. During 2018, 2017 and 2016, certain inventory quantities were reduced. The reductions resulted in liquidation of LIFO inventory carried at lower costs prevailing in prior years, the effect of which decreased the LIFO provision in 2018 by $1.1 million, and in 2017 and 2016 by $0.2 million. The Company accounts for its Food Distribution and Military inventory using a perpetual system and utilizes the retail inventory method (“RIM”) to value inventory for center store products in the Retail segment. Under RIM, inventory is stated at cost with cost of sales and gross margin calculated by applying a cost ratio to the retail value of inventories. Fresh, pharmacy and fuel products are accounted for at cost in the Retail segment. The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. The Company records allowances for inventory shortages based on the results of recent physical counts to provide for estimated shortages from the last physical count to the financial statement date. Goodwill and Intangible Assets: Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in business combinations after amounts have been allocated to intangible assets. Goodwill is not amortized, but is reviewed for impairment during the last quarter of each year, or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, using a discounted cash flow model and comparable market values of each reporting segment. Measuring the fair value of reporting units is a Level 3 measurement under the fair value hierarchy. See Note 8, Fair Value Measurements, for a discussion of levels. Intangible assets primarily consist of trade names, customer relationships, favorable lease agreements, pharmacy prescription lists, non-compete agreements, liquor licenses and franchise fees. The following assets are amortized on a straight-line basis over the period of time in which their expected benefits will be realized: favorable leases (related lease terms), prescription lists and customer relationships (period of expected benefit reflecting the pattern in which the economic benefits are consumed), non-compete agreements and franchise fees (length of agreements), and trade names with definite lives (expected life of the assets). Indefinite-lived trade names are not amortized but are tested at least annually for impairment, and liquor licenses are also not amortized as they have indefinite lives. Intangible assets are included in “Other Assets, net” in the consolidated balance sheets. Property and Equipment: Property and equipment are recorded at cost. Expenditures which improve or extend the life of the respective assets are capitalized, whereas expenditures for normal repairs and maintenance are charged to operations as incurred. Depreciation expense on land improvements, buildings and improvements, and equipment is computed using the straight-line method as follows:
Land improvements | 15 years
Buildings and improvements | 15 to 40 years
Equipment | 3 to 15 years
Property under capital leases and leasehold improvements are amortized on a straight-line basis over the shorter of the remaining terms of the leases or the estimated useful lives of the assets. Internal use software is included in property and equipment and amounted to $33.5 million and $30.7 million as of December 29, 2018 and December 30, 2017, respectively. Impairment of Long-Lived Assets: The Company reviews and evaluates long-lived assets for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable. When the undiscounted expected future cash flows are not sufficient to recover an asset’s carrying amount, the fair value is compared to the carrying value to determine the impairment loss to be recorded. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less the cost to sell. Fair values are determined by independent appraisals or expected sales prices based upon market participant data developed by third party professionals or by internal licensed real estate professionals. Estimates of future cash flows and expected sales prices are judgments based upon the Company’s experience and knowledge of operations. These estimates project cash flows several years into the future and are affected by changes in the economy, real estate market conditions and inflation. Reserves for Closed Properties: The Company records reserves for closed properties that are subject to long-term lease commitments based upon the future minimum lease payments and related ancillary costs from the date of closure to the end of the remaining lease term, net of estimated sublease rentals that could be reasonably expected to be obtained for the property. Future cash flows are based on contractual lease terms and knowledge of the geographic area in which the closed site is located. These estimates are subject to multiple factors, including inflation, ability to sublease the property and other economic conditions. Internally developed estimates of sublease rentals are based upon the geographic areas in which the properties are located, the results of previous efforts to sublease similar properties, and the current economic environment. The reserved expenses are paid over the remaining lease terms, which range from one to 10 years. Adjustments to closed property reserves primarily relate to changes in subtenant income or actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the changes become known. The current portion of the future lease obligations of stores is included in “Other accrued expenses,” and the long-term portion is included in “Other long-term liabilities” in the consolidated balance sheets. Debt Issuance Costs: Debt issuance costs are amortized over the term of the related financing agreement and are included as a direct deduction from the carrying amount of the related debt liability in “Long-term debt and capital lease obligations” in the consolidated balance sheets. Insurance Reserves: SpartanNash is self-insured through self-insurance retentions or high deductible programs for workers’ compensation, general liability, and automobile liability, and is also self-insured for healthcare costs. Self-insurance liabilities are recorded based on claims filed and an estimate of claims incurred but not yet reported. Workers’ compensation, general liability and automobile liabilities are actuarially estimated based on available historical information on an undiscounted basis. The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis for its self-insurance retentions and high deductible programs. On a per claim basis, the Company’s exposure is up to $0.5 million for workers’ compensation and general liability, $1.0 million for automobile liability and $0.5 million for healthcare per covered life per year. A summary of changes in the Company’s self-insurance liability is as follows:
(In thousands) | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of year | $ |  | 15,155 |  |  | $ |  | 14,730 |  |  | $ |  | 14,466 |
Expenses |  |  | 49,532 |  |  |  |  | 54,748 |  |  |  |  | 49,560 |
Claim payments, net of employee contributions |  |  | (50,396 | ) |  |  |  | (54,323 | ) |  |  |  | (49,296 | )
Balance at end of year | $ |  | 14,291 |  |  | $ |  | 15,155 |  |  | $ |  | 14,730 |
The current portion of the self-insurance liability was $8.6 million and $8.7 million as of December 29, 2018 and December 30, 2017, respectively, and is included in “Other accrued expenses” in the consolidated balance sheets. The long-term portion was $5.7 million and $6.5 million as of December 29, 2018 and December 30, 2017, respectively, and is included in “Other long-term liabilities” in the consolidated balance sheets. Income Taxes: Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred and other tax assets and liabilities. Earnings per share: Earnings per share (“EPS”) is computed using the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends and their respective participation rights in undistributed earnings. Participating securities include non-vested shares of restricted stock in which the participants have non-forfeitable rights to dividends during the performance period. Diluted EPS includes the effects of stock options. The following table sets forth the computation of basic and diluted EPS for continuing operations:
(In thousands, except per share amounts) | 2018 |  |  | 2017 |  |  | 2016 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) from continuing operations | $ |  | 33,791 |  |  | $ |  | (52,617 | ) |  | $ |  | 57,056 |
Adjustment for (earnings) loss attributable to participating securities |  |  | (746 | ) |  |  |  | 908 |  |  |  |  | (1,011 | )
Earnings (loss) from continuing operations used in calculating earnings per share | $ |  | 33,045 |  |  | $ |  | (51,709 | ) |  | $ |  | 56,045 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares outstanding, including participating securities |  |  | 36,012 |  |  |  |  | 37,419 |  |  |  |  | 37,483 |
Adjustment for participating securities |  |  | (795 | ) |  |  |  | (646 | ) |  |  |  | (664 | )
Shares used in calculating basic earnings per share |  |  | 35,217 |  |  |  |  | 36,773 |  |  |  |  | 36,819 |
Effect of dilutive stock options |  |  | 10 |  |  |  |  | — |  |  |  |  | 73 |
Shares used in calculating diluted earnings per share |  |  | 35,227 |  |  |  |  | 36,773 |  |  |  |  | 36,892 |
Basic earnings (loss) per share from continuing operations | $ |  | 0.94 |  |  | $ |  | (1.41 | ) |  | $ |  | 1.52 |
Diluted earnings (loss) per share from continuing operations | $ |  | 0.94 |  |  | $ |  | (1.41 | ) |  | $ |  | 1.52 |
Weighted average shares issuable upon the exercise of stock options that were not included in the EPS calculations because they were anti-dilutive were 75,159 for 2017. There were no anti-dilutive stock options in 2018 or 2016. Stock-Based Compensation: All share-based payments to associates are recognized in the consolidated financial statements as compensation cost based on the fair value on the date of grant. The grant date closing price per share of SpartanNash stock is used to estimate the fair value of restricted stock awards and restricted stock units. The value of the portion of awards expected to vest is recognized as expense over the requisite service period. Shareholders’ Equity: The Company’s restated articles of incorporation provide that the Board of Directors may at any time, and from time to time, provide for the issuance of up to 10 million shares of preferred stock in one or more series, each with such designations as determined by the Board of Directors. At December 29, 2018 and December 30, 2017, there were no shares of preferred stock outstanding. Advertising Costs: The Company’s advertising costs are expensed as incurred and are included in Selling, general and administrative expenses. Advertising expenses were $40.9 million, $43.4 million and $46.6 million in 2018, 2017 and 2016, respectively. Accumulated Other Comprehensive Income (Loss)(“AOCI”): The Company reports comprehensive income (loss) that includes net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to expenses, gains and losses that are not included in net earnings, such as pension and other postretirement liability adjustments, but rather are recorded directly to shareholders’ equity. These amounts are also presented in the consolidated statements of comprehensive income. As of December 29, 2018 and December 30, 2017, AOCI relates to the pension and postretirement plans. Discontinued operations: Certain of the Company’s Food Distribution and Retail operations have been recorded as discontinued operations. Results of discontinued operations are excluded from the accompanying notes to the consolidated financial statements for all periods presented, unless otherwise noted. Results of discontinued operations reported on the consolidated statements of operations are reported net of tax. Adoption of New Accounting Standards and Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers – Topic 606” (“ASC 606”). The new guidance affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. As of the beginning of 2018, the Company adopted ASC 606 and all subsequent ASUs that modified ASC 606. Refer to Note 3, Revenue Recognition, for additional information about adoption of this guidance and additional disclosures required under the standard. From a principal versus agent perspective, the Company determined that certain contracts in the Food Distribution segment that were historically reported on a gross basis are now required to be reported on a net basis, resulting in a corresponding decrease to both net sales and cost of sales of $177.1 million in 2018 from what would have been recognized under previous guidance. The implementation of the guidance had no impact on gross profit, net earnings, the balance sheet, cash flows, equity, or the timing of revenue recognition in current or prior periods. The adoption of the guidance using the full retrospective method resulted in decreases to fiscal 2017 and 2016 net sales and cost of sales previously reported as shown in the following table:
| Full Year |  |  | 4th Quarter |  |  | 3rd Quarter |  |  | 2nd Quarter |  |  | 1st Quarter |
(In thousands) | (52 Weeks) |  |  | (12 Weeks) |  |  | (12 Weeks) |  |  | (12 Weeks) |  |  | (16 Weeks) |
2017 | $ |  | 164,283 |  |  | $ |  | 38,725 |  |  | $ |  | 38,246 |  |  | $ |  | 38,510 |  |  | $ |  | 48,802 |
2016 | $ |  | 173,516 |  |  | $ |  | 43,168 |  |  | $ |  | 42,382 |  |  | $ |  | 38,594 |  |  | $ |  | 49,372 |
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits.” ASU 2017-07 requires that the service cost component of pension and postretirement benefit costs be presented in the same line item as other current employee compensation costs and other components of those benefit costs be presented separately from the service cost component and outside a subtotal of income from operations, if presented. The ASU also requires that only the service cost component of pension and postretirement benefit costs is eligible for capitalization. The Company adopted this guidance as of the beginning of 2018. Accordingly, benefit costs other than service cost, are reflected in the condensed consolidated statements of earnings in Other, net, whereas they previously were recognized in Selling, general and administrative expenses. Retrospective application resulted in a decrease to Other, net and an increase in Selling, general and administrative expenses. The costs associated with the reclassifications were not material in any of the periods presented. In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract” in order to provide additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. This is an amendment to ASU 2015-05, “Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company early adopted this guidance retrospectively as of the beginning of fiscal 2018, as permitted by the amendment. The adoption of this guidance did not have a significant effect on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this ASU remove disclosures that are no longer considered to be cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in ASU 2018-14 are effective for fiscal years ending after December 15, 2020 and will be applied on a retrospective basis to all periods presented. The adoption of this guidance is not expected to have a significant effect on the Company’s financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations – Clarifying the Definition of a Business.” ASU 2017-01 narrows the definition of a business and provides a screen to determine when a set of the three elements of a business – inputs, processes, and outputs – are not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The guidance was effective for the Company as of the beginning of 2018. As no business combinations have occurred in 2018, there has been no impact on the consolidated financial statements for the current year. The adoption has no impact on the Company’s historical financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases.” The FASB subsequently issued ASU’s 2018-01, 2018-10, and 2018-11, which include clarifications and provide various practical expedients and transition options related to ASU 2016-02. ASU 2016-02 provides guidance for lease accounting and stipulates that lessees will need to recognize a right-of-use asset and a lease liability for substantially all leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease rent payments. Treatment in the consolidated statements of operations will be similar to the current treatment of operating and capital leases. The Company adopted the standard as of December 30, 2018, the beginning of fiscal 2019. The Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows for the carryforward of the historical lease classification. In addition, the Company has elected the hindsight practical expedient to reassess the reasonably certain lease term for existing leases. The election of the hindsight practical expedient will result in the extension or reduction of lease terms for certain existing leases, and adjustments to the useful lives of corresponding leasehold improvements. The Company will make an accounting policy election not to record lease liabilities or right of use assets for short-term leases, those with an initial minimum term of less than one year. The adoption of the standard will result in a recognition of additional lease assets and lease liabilities of approximately $240 million and $290 million, respectively, as of December 30, 2018, and a transition adjustment recorded to beginning of the year retained earnings of approximately $27 million (net of deferred tax impact of $9 million). The transition adjustment relates to impairment of right of use assets in transition and the impact of hindsight on the evaluation of lease term. Remaining differences between lease assets and liabilities relate to the derecognition of existing lease-related liabilities and assets recorded under ASC 840, which were included in beginning lease liabilities under ASC 842. The Company does not believe the new standard will have an impact on liquidity or on debt-covenant compliance under the current agreements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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