Thank you. Good morning, and welcome to Spartan Stores First Quarter Fiscal 2013 Earnings Conference Call.

By now, everyone should have access to the earnings release for the first quarter ended June 23, 2012. For a copy of the release, please visit Spartan Stores' website at www.spartanstores.com under For Investors.

This call is being webcast and a replay will be available on the company's website until August 16, 2012.

Before we begin, we'd like to remind everyone, comments made by management during today's call will contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that might involve significant risks and uncertainties.

Actual results may differ materially from the results discussed in these forward-looking statements. Internal and external factors that might cause such differences include, among others, competitive pressures among food, retail and distribution companies, the uncertainties inherent in implementing strategic plans and general economic and market conditions.

Additional forward -- additional information about risk factors and any uncertainties associated with Spartan Stores' forward-looking statements can be found in the company's first quarter earnings release, fiscal annual report on Form 10-K and in the company's other filings with the SEC. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

Spartan Stores disclaims any intention or obligation to update or revise any forward-looking statements.

This presentation will include non-GAAP financial measures as defined in Regulation G. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and the other information required by Regulation G is included in the company's earnings release issued after market close yesterday.

It is now my pleasure to introduce Mr. Dennis Eidson, President and CEO of Spartan Stores, for opening remarks.

Thanks, Katie. Good morning, and thank you for joining our first quarter fiscal '13 earnings conference call.

And with me this morning are members of our team, including our EVP and Chief Financial Officer, Dave Staples; EVP of Retail Operations, Ted Adornato; and our EVP of Wholesale Operations, Derek Jones.

I'll begin by providing you with a brief overview of our business and financial performance for first quarter, and then Dave can share some more for information and specific details about the first quarter financial results, as well as look at our outlook for the second quarter and the full fiscal 2013. And finally, I'll provide some closing remarks, and we'll open up the call to take some questions.

Let me begin by providing you with an economic overview of our market and the pace of the economic recovery remains slow. The unemployment rate in Michigan has been relatively stable in the first quarter of fiscal '13.

It is approximately 200 basis points below the same time last year. But it hasn't stopped slightly over the past couple of months.

The improvement in rate has been driven more by people exiting the workforce for improvements in employment.

For the first quarter, a number of people employed in the state, part of the Bureau of Labor Statistics household survey, was up slightly at 39,000 versus the prior year. The good news is that there were more people employed on a year-over-year basis for the first time in a while, which is clearly a positive.

We're encouraged by the improving sales trend in our retail segment and the continued growth in our distribution business, given the environment that I just described. By remaining focused on managing the controllable aspects of our business and taking steps to enhance the value we provide with our products, pricing and promotional strategies, we achieved growth in both our distribution and retail segments sales, and lowered our operating expenses compared to the same period last year.

In addition, we remain committed to increasing the return to our shareholders as demonstrated by the increase in our quarterly dividend and share repurchases.

Now focusing on our distribution segment results. Our distribution segment sales increased approximately 0.5% for the quarter, which is the seventh consecutive quarter we've shown improved sales, primarily due to new customer growth in the quarter.

We continue to focus on best serving our distribution customers by providing value-added services, including enhancing our product offerings and providing them with the technology to make better purchasing decisions. Our robust distribution website and handheld technology provides customers with comprehensive products and logistics information in the back office or on the store floor.

We believe this value-added tools help us -- to help set us apart from other wholesalers and make Spartan the go-to distributor in the markets that we serve.

On the product side. We continue to drive both retail and distribution sales through the expansion of our private brand program.

This program provides value offerings for our distribution customers and more choices for our end consumer, both of which are critical components of our strategy to weather the current economic environment and enhance our product offerings.

During the quarter, we launched 136 net new private brand items, and ended the quarter with approximately 4,000 items in our lineup. For the full year fiscal '13, we expect to introduce approximately 400 new private brand items, representing an increase of 10% from fiscal '12.

Over the remainder of the year, we will continue to direct our efforts on increasing sales penetration for the existing distribution customer base, securing new independent customers, improving the efficiency of our current operations and further enhancing our value-added service offering in order to drive both our distribution sales and profitability.

Total net sales in our retail segment for the first quarter were comparable to prior year. However, our comp store sales, excluding fuel, actually increased 0.1%, which represents a significant improvement in our run rate.

We're pleased with our progress on this front, which we attribute to several factors including the launch of our "Yes Is More" promotional program and anticipated sales benefit from a calendar shift and our capital plan activity.

As you are aware, one of our key initiatives has been our YES rewards loyalty program which provides many value-added benefits to our consumers including free or discounted groceries, and select free prescription drugs. In fiscal '12, we completed the rollout of the program to all of our supermarket banners and we now have over 862,000 registered in the -- registered -- household registered in the program at the end of the first quarter.

Further, approximately 86% of the transactions and 94% of the sales were through the program during the first quarter of '13.

This participation percentages increased over the fourth quarter rates by 5% and 2% respectively. This growth in such a relatively short period is evidence of the growing traction of this program and our new "Yes Is More" campaign.

Building on the success of our YES Rewards program, we launched our "Yes Is More" promotional campaign in late April as part of our commitment to deliver more value to our consumers. A key component of the program was the introduction of a 90-day price-freeze on over 300 items that consumers buy the most, including milk, bread, chicken and eggs.

The program was brought to life through a multimedia campaign, including television, radio and print and included a complete redesign of in-store promotional materials. In addition, we are reaching out to our consumers through digital touch points which includes our YES website and new mobile app as well as targeted email offers.

The first round of the campaign ramped up 2 weeks ago, and we consider it a resounding success with growth in a number of YES Reward members and supermarket sales through the program. While it did impact margins, as Dave will discuss in a moment, our customer satisfaction scores show significant improvement for both price paid and value.

As a result of the yearly success of the program, we have launched the second round of the promotion in the first week of our fifth period. In addition to "Yes Is More", our consumers continue to be rewarded through our pharmacy and innovative fuel programs.

Our pharmacies posted a 6.4% increase in script count and we opened another fuel center, bringing our total to 27, ending our -- introducing our fuel values to even more consumers.

Before turning over the call to Dave, I'll provide you with an update on our capital plan. During the first quarter, we opened one new store, a new value-based store, Valu Land, in Lansing, Michigan, and one new Family Fare store with a fuel center that represented a relocation of an existing store, and we remodel 2 stores.

Additionally, 3 Glen's locations, including the 2 remodels during the quarter, were converted to our Family Fare banner. As we discussed last quarter, we're excited about the potential for a new Valu Land format, particularly for today's price-conscious consumer.

With a footprint that is slightly half the size of our traditional stores, Valu Land is an everyday low price neighborhood grocery store, offering a broader assortment of products, including more national brands and quality fresh produce and meat when compared to the list of assortment competitors.

We converted 3 stores to the Valu Land format last year, but the Lansing location is the first new store under this banner. We're encouraged by the early customer response and first quarter sales were in line with our expectations.

We continue to work on developing an incremental 3 to 5 locations which we expect to open this year.

During the remainder of the year, we expect to complete 4 additional major remodels, and during the second quarter, we have already opened 2 new fuel centers, bringing our total to 29, which will complete our efforts for this year.

From a competitive perspective, we experienced no new supercenter openings in the first quarter and do not expect any openings to affect our retail locations in fiscal year 2013. In fact, we just cycled the only supercenter opening impacting our corporate-owned stores from last year.

With that overview, I'll turn the call over to Dave for more detail on our first quarter financial results and an outlook for the second quarter and for full fiscal '13. Dave?

Thanks, Dennis, and good morning, everyone. Consolidated net sales for the 12-week first quarter increased to $603.9 million from $602.6 million in the year-ago quarter.

Both the distribution and retail segments reported increased sales during the quarter. Distribution and fuel sales represented 42.8% and 7.5% respectively of consolidated net sales compared to 42.7% and 7.4% respectively in last year's first quarter.

The consolidated gross profit margin for the first quarter decreased 60 basis points to 20.2% from 20.8% last year. The decline in gross margin was primarily due to lower-than-anticipated distribution in retail margin rates, as a result of the impact of reduced inflation driven inventory gains, the launch of the company's "Yes Is More" promotional campaign in the retail segment, market conditions in certain fresh departments, as well as grand opening promotional expenses.

First quarter operating expenses were $110 million or 18.2% of net sales compared to $111.3 million or 18.5% of net sales in the same period last year. Our expense leverage was driven by productivity improvements in the distribution retail segments, as well as lower employee incentive compensation expense.

These items were partially offset by increased marketing and supply expenses associated with "Yes Is More" promotional campaign, and the 2 new and 2 remodel store grand openings.

We continue to be very pleased with our team's ability to manage the expense side of our business.

Adjusted EBITDA for the quarter was $22.6 million or 3.8% of net sales compared to $24.6 million or 4.1% of net sales last year. Earnings from continuing operations for the first quarter of fiscal 2013 were essentially flat at $6.1 million or $0.28 per diluted share compared to $6.1 million or $0.27 per diluted share last year.

The $0.01 difference was due to lower weighted average shares resulting from our share repurchase activity.

First quarter fiscal 2013 includes a net after-tax benefit of $600,000 or $0.03 per diluted share, and the first quarter of fiscal 2012 includes the net after-tax charge of $500,000 or $0.02 per diluted share due to changes in the state of Michigan's tax laws.

Turning to our operating segments. First quarter net sales for the distribution segment increased 0.5% to $258.3 million from $257.1 million in the year-ago period.

First quarter operating earnings for the distribution segment increased 5.7% to $7.8 million compared to $7.4 million in the same period last year.

The operating earnings increase is due to lower incentive compensation expense versus last year and the continued improvements in operating expense controls, partially offset by lower gross margin due to reduced inflation driven inventory gains.

The reduction in this gain is a result of the decline in the rate of inflation on a quarter-over-quarter basis.

In our retail segment, first quarter net sales were up approximately $0.2 million to $345.6 million compared to $345.4 million in the same period last year. Comparable store sales, excluding fuel, were positive 0.1%, a significant improvement from our previous run rate.

As Dennis previously mentioned, one of the factors that helped our comps was the calendar shift which resulted in one more week of the summer activity in this year's first quarter.

Retail segment operating earnings for the quarter were $3.9 million compared to $6.6 million in the first quarter of fiscal 2012. The operating earnings decrease was due to the launch of our "Yes Is More" promotion and expenses associated with our new and remodeled store openings.

In addition, our margin rate was impacted by lower inflation driven inventory gains, market conditions, and certain fresh departments and grand opening expenses, partially offset by lower employee incentive compensation and our ongoing cost-containment initiatives.

From a cash flow perspective, our operating cash flow was a negative $19.2 million for the first quarter of fiscal 2013 compared to a positive $6.7 million in the -- for the same period last year. The decrease was principally due to the timing of seasonal working capital requirements given that the first quarter this year ended one week closer to the July 4 holiday than last year.

In addition, that reflects a $9.8 million nonrecurring federal tax payment to take advantage of certain regulations which resulted in the lower provision in this quarter. The cash impact of both of these items will be reversed over the remainder of fiscal 2013.

During the first quarter, we repurchased 604,000 shares of our stock for a total of $10.9 million and have approximately 50% of our $50 million share repurchase program still available for future stock repurchases.

Total net long-term debt was up $19.6 million to $154.6 million as of June 23, 2012, versus $137 million at the end of the first quarter of fiscal 2012, primarily reflecting the uses of cash previously mentioned. Additionally, during the quarter, as previously announced, we amended our credit facility in June to increase operational flexibility and extend the maturity date to June 2017.

The initial amount of the facility is $200 million, with a committed accordion feature that would increase the facility up to $235 million and an additional accordion option which could take total availability to $300 million, subject to lender approval.

Interest expense related to the facility is expected to be reduced by approximately $400,000 annually.

Based on our anticipated strong cash flow and the nonrecurring nature of the just-mentioned first quarter cash payments, we expect our total net long-term debt to return to more normal levels over the remainder of fiscal 2013.

Finally, as previously reported, due to our solid financial condition and anticipated healthy cash flow, our board approved a 23% increase in the company's quarterly cash dividend to $0.08 per share of outstanding common stock for an annual rate of $0.32. Our prior quarterly cash dividend was $0.065 per share for an annual rate of $0.26.

We believe that cash flow from operations and the approximately $155 million of availability under our revolving credit facility will be sufficient to fund our operations and strategic growth initiatives, as well as continue to return capital to our shareholders through the quarterly dividend or share repurchases in fiscal 2013.

I will now provide further detail on our outlook for the second quarter and remainder of fiscal year 2013.

We expect comparable store sales for the second quarter will be lower when compared to the first quarter of fiscal 2013 by 1% to 1.5%, and earnings from continuing operations will be slightly below the prior-year results. This guidance reflects our expectations of continued economic challenges, the lower inflation related gains and the calendar shift.

Calendar shift will impact reported comparable store sales, excluding fuel, by approximately 50 to 100 basis points. As a result of the calendar shift, a higher volume sales week moved out of the second quarter and into the first quarter.

Now lower volume sales week in September will shift out of the third quarter and into our current year second quarter. As we look at the remainder of the year, we expect the economic recovery to continue, although at a slower rate.

We also expect lower inflation related gains when compared to the prior year for the next couple of quarters. However, we expect the unfavorable impact to be lower in the second and third quarters of fiscal 2013 than we experienced in the first quarter.

For fiscal 2013, we expect flat comparable store sales. We also anticipate that earnings per diluted share from continuing operations for fiscal year 2013 will approximate fiscal year 2012, excluding the 53rd week last year, despite the negative impact of $0.05 to $0.06 per share as a result of the net effect of favorable items realized in the fourth quarter of fiscal '12 that will not continue into fiscal 2013.

These items related predominantly to that LIFO credit realized in the prior-year quarter due to lower-than-anticipated inventory levels, favorable incentive compensation expenses and favorable occupancy costs. We currently expect capital expenditures for fiscal year 2013 to be in the range of $42 million to $44 million, with depreciation and amortization in the range of $39 million to $40 million.

And following the amendment of our credit facility, we now expect total interest expense to approximate $13 million to $14 million.

This concludes our financial discussion, and I'll now turn the call back to Dennis for his closing remarks. Dennis?

Thanks, Dave. In closing, we're pleased with the improvement in our comp store sales trend, which we believe is driven by our continued solid execution and ability to provide the brands, products and services that best deliver value and convenience to our consumer in today's economy.

We're encouraged by the sales performance of our latest Valu Land store, and continue to work on opening 3 to 5 Valu Land locations in the remainder of fiscal '13, as well as remodels and rebanners of our other store formats in selected markets.

We continue to expect the pace of the economic recovery in Michigan to be slow and are focused on positively impacting the factors within our control that can improve our financial performance in both distribution and the retail segments, namely our product, pricing and promotional strategies.

With an overarching focus on enhancing the value proposition, we will continue to refine our operating strategies to more effectively navigate these challenging times and best position us for when the economic environment improves. Additionally, we will continue to monitor the industry landscape for potential acquisition opportunities in each segment, as well as work hard to expand our distribution segment customer base outside of Michigan.

And with that, we'll now open up the call for any questions.

Just wanted to first ask, Dennis, about the store conversions from Glen's to Family Fare. Does that indicate anything about the future of Glen's?

Or what's sort of behind that decision?

We've been playing around a little bit with that. I think we now have -- maybe we have 8 stores that we rebannered to Family Fare.

The majority of those are on the southern tier of the Northern Michigan, but up against the southern marketplace. We've converted them post capital expenditures in most instances.

We're measuring those results. They've been very favorable as we've converted.

The brand Family Fare seems to have a better value image in the marketplace once we measure that post conversion. So we could see over time more of those stores converted.

Do you think over time, the Glen's banner could be more like D&W, a little more upscale in general as opposed to how it is now?

No. I don't see it that way, Chuck.

The demographic profile in Northern Michigan for the most part, and there are always some packets, probably does not lend itself to significant expansion to the Fresh Market brand. As you do know, in north -- our north Petoskey store, we do have a Glen's fresh market of course performing very well for us.

But that market is very seasonal and has the kind of clientele that looks for wider wine assortment as an example. Starbucks resonates in that market, the Boar's Head lunch meats.

So we really try and do this as locally as we can as it relates to the offer in the branding.

You said each of the Glen's has been remodeled before the name is changed?

I think there's maybe one exception to that where the geography like Harrison we converted without a remodel. But for the most part, the answer to that is yes.

Okay. Look at the private label product introduction, that looks great.

What -- how is private label performing this year? Can you give us any number as a percent of sales and unit growth, that sort of thing?

Yes, private label for the quarter at retail -- this is the number we usually give, the unit penetration was 23.64%. And that continue to outpace the national number by 87 points, nationally, it was 22.77%.

So that's good. It was a little softer than prior year as was the national number.

We had a promotion shift, we think that'll reconcile itself going forward. I think the overarching point about private label is -- we've treated it as a strategic plan here you since the day I came and we're pleased with the growth.

We think the product is great. We like the packaging redesign.

We've been innovative with a number of items, and we think there's plenty of upside in terms of the private label penetration going forward. The consumer and every bit of research we are reading about supermarkets are saying, generally, they pride more private brands during this economic malaise.

They like them and they're going to continue to buy them going forward. I think it's a good thing for the industry.

When you're looking at starting the sales across your private labels, the good, better, best, how is that shaping up? Are you seeing it skew middle, high, low?

Any comment in there?

The workforce for us is really right in the middle. The Spartan brand, it accounts for over 90% of the volume we do in private brands, and actually, that's a little weird in the first quarter.

Both the high end and the low end softens a little bit from a year ago, and the middle was performed better. I guess I would have guessed we would have done a little better in the upper end than we did, but we didn't.

So those are our numbers.

Okay. And when you look at the sales mix across your various banners, is it telling anything about the consumer, above and beyond, that they're cautious.

Would you want to comment on anything the way people are...

We look at that on our stores, we look it in the marketplace, and you try and figure out the pattern, what is selling, what isn't selling. There is just not a clear-cut picture there.

We -- I can't bucket -- the indulgent stuff has really taken off for the value stuff. It's not very clear.

There are several categories across the marketplace continue to struggle, frozen food being one of those, prepared meals, I don't know if there's more -- customers don't want to pay that incremental cost and they prefer to cook it at home. But no one category jumps out us there moving one way or the other.

This is actually Ryan Gilligan on for Karen. Can you talk about the different initiative such as the YES card, the pharmacy program, the partnership with Speedway and the price freeze and what impact they're having on results?

And is there room for improvement, and if so, when will we see it?

We are generally pretty energized about the whole "Yes Is More" campaign and we kind of bucket all of those initiatives that you referred to under that "Yes Is More". The price freeze was a key component of what we launched in Q1.

And it did remarkably well for us. I think I had characterized it as a resounding success.

We have just launched Phase 2, another 90 days price freeze, which we're referring to as "Yes is Even More" And we repeated some of those key items that we froze for 90 days. When you're talking about under $1 bread, under a $1 -- head lettuce is $0.88 everyday, boneless skinless chicken breast, $1.88 everyday.

Those items resonated with the consumer. And I think, as you know, we do kind of constant customer feedback, and our scores for value and price significantly improved during the quarter.

So -- but that was the key component and we redid all of the store POS to tie in, and it looks great. We're on TV and our core markets and that certainly helped drive that and it embraces all of it.

So we -- we're on TV and we talk about the pharmacy program and that we can get free antibiotics and free diabetic meds under the umbrella. We run $0.50 off on fuel with a $75 purchase.

It's a TV event. And so I think this is, the marketing is comprehensive, and I think, is doing its job to deliver the message to the consumer.

Obviously, we think there's more upside that we wouldn't continue to mind in that field in terms of trying to attract not only new customers, but get a larger share of wallet from the existing loyal customer. And now that we have the curved data across the whole portfolio, we're able to do more targeted events to be more relevant with the consumer and offers.

So I rambled on maybe a little bit, but I think we see more upside.

Okay, thanks. That's helpful.

Has there been any competitive response to these initiatives? Or how would you characterize the competitive environment?

I wouldn't say there's been no competitive response, but I also wouldn't say that we've been hit on head on with a direct response to the any of those initiatives, specifically.

Okay, and lastly. Can you maybe quantify the operating profit dollar impact of these initiatives on this quarter's results?

I don't think we are prepared to quantify them specifically. I think we called out that, clearly, they had an impact on the retail operating results.

And we may have rubbed our engines a little too aggressively in a couple of places. And any time you launch a new program, you want to kind of a setback, evaluate and tweak a little bit, but clearly, there was a negative impact on net profitability.

But moving that comp store sales trend from what was a negative 3 in Q4 to just easing over positive certainly felt pretty good.

And would it be fair to say that the counter shift helped this quarter's comp by 50 to 100 basis points too?

It would be fair to say that.

So if you look at the run rate as we're going from this quarter into next with all the calendar shifts, is it decelerating a little bit, the same? I mean, how should I think about it?

I guess I'm a little bit confused on kind of how things are trending currently.

You're specifically referring to retail comps...

Exactly, retail comps.

I think, we tried to give you a pretty specific guidance. We did give you pretty specific guidance in Q2, right?

Negative 1% to 1.5%, 50 to 100 points of that being reaction to the calendar shift. We tried to anticipate that question and answer it, probably putting just a little bit more texture on what we're feeling at the moment.

The consumer still doesn't feel like she is backed by any stretch. Our traffic is pretty good.

But -- and I think I've said this before and I almost sound silly, it's like she's got to find 9 items on the dollar, and she's spreads it accordingly. We're feeling a little bit of softening in the sales per item, Scott.

We have some deflationary pressure and some categories in the quarter like dairy and produce. The good thing is, in both of those areas, we're selling more tonnage despite the fact that we're getting more dollars despite the deflationary impact.

A little bit soft, not significantly different.

Okay, that's perfect. That's exactly what I was looking for.

I appreciate the color. And as we move forward, just talking about inflation expectations.

I mean, it's been so much written on the press about the drought. Clearly inflation has come down currently, but as you guys look out, what do you think the impact is going to be as you move into maybe later part of this year into next?

I mean -- and what do you think the consumer's ability is to absorb any kind of inflation that comes at them?

We've chatted a little bit about this on past calls. I think the consumer's reaction, I think, it depends.

We're reading the same thing you are, Scott. It sounds like in the short run, the corn crop could have the effect of actually having some of that beef come to market a little sooner because it's a better investment than trying to feed them with the expensive grain.

So we may actually see a little bit of a dip in this prices. But then just a forecast would call for that to be reversed in protein and maybe in a pretty significant way.

I think the government today is looking at beef, year-to-date, statistics and consumer price is up nearly 7% on a year-to-date basis. They actually showed a full year at 3.5% to 4.5% which reflects, I think, some softness in the back half of the calendar year.

But they're also looking at 4% to 5% next year, which is a bit on the high end. So I guess, I would say that's -- we're seeing that we believe in that.

We've seen things like poultry go up significantly. I think our most current period, 4-week period, we've seen poultry cost go up 18%, that's sizable.

And I think that feed impacts poultry obviously much quicker than it does the beef herd. So we're seeing that.

But on balance, if you look at the full year inflation, it still looks like it's going to be that 2.5% to 3.5% for food and home. I think the historical average is 2.8%.

The forecast is for maybe 3% to 4% next year, so maybe a little bit on the higher end. But we're not ratcheting back up to that 6%, 7%, we saw few years ago.

I think if we can stay around that 3%, that will be okay as it relates to the consumer. But I think all bets are off by commodity if we get double-digit spikes in beef, then she retrenches and she changes where -- which protein she buys.

Okay, perfect. Then I just have one more.

Balance sheet's in really good shape. You guys have been an inquisitive company in the past, haven't seen anything in a while now.

Clearly, there's a company out there to put themselves up for sale at least to a degree. Can you just give us the parameters in kind of what you're looking at?

Would you be interested in any of those assets?

This is Dave. We're always interested in whatever goes on.

I mean, there's so much going on in that one instance you're talking about. I think it'll take time to see how that all shakes out.

Depending on how they would come about their process and what type assets might come on the market, we'd always be interested. So we try to keep our ear to the ground, monitor developments like that as well as others and see if there's something reasonable that would work out for us.

And as we pointed out in the script, and we've talked about this morning, I mean, we continue to want to be inquisitive for the right opportunities. I mean, it's a core plank for the strategy of the company.

And when you do that, are you thinking distribution? Would you do a combination distribution in retail?

I mean, how do you think about it as far as the asset base goes?

It's typically -- we look at all segments and we look at which one provides the greatest return. So it could be distribution, it could be retail, and I guess, it could be a combination of that if that were to provide the best overall return.

So we really try to look at each opportunity on its own merit to determine how does it fit with us long term, how is the return we're going to get off of that transaction work into that fit within our parameters, and we could make a move in either direction. We stated, our preference initially would be try to expand our distribution footprint first, and that will be a preference, but again, it would really depend on potential return of the opportunities.

This is actually Karen. A quick questions for you on remodels and returns since you just kind of brought that up.

I wanted to just talk a little bit about specifically your returns on your remodels and what you're seeing. And I guess I'd like to kind of try to break it down between -- so first question is how many of your remodels are offensive versus defensive?

And then what are the returns on each? And then when you look at your returns on your defensive remodels, are you adjusting your sales base down as in -- if you hadn't done it yourself would have dropped x percent, but you did it so they actually maintained that base level?

Can you maybe just talk a little bit about that?

Sure. Let me try to go through the whole process for you.

So it always depends on whether -- on the environment. So with only one competitive opening last year, the majority of our capital program was clearly offensive.

And this year, with no new openings, it was offensive. So it kind of depends on the market.

In a year where you have a number of supercenters opening, it would probably canter a little bit more to the defensive, because -- we typically try to understand these people coming in advance and get our remodels on prior to their opening. But we want to try to get the positive out of that before they start.

So as you discussed that, we are -- our returns, we have a hurdle, we're looking for somewhere in the 15% mark. That fluctuates by type of remodel.

To the extent it's a remodel with a substantial model deferred maintenance. In that scenario, you'll probably get a lower return than the 15%, including the deferred maintenance.

Excluding the deferred maintenance, we're still looking to get over that 15%. On average, I think our remodels over the course of time has done nicely in the protein or beating that 15%.

But again, that can vary depending on the year and some of the uncontrollable things that happen. From a competitive scenario, when we look at that analysis, you're right.

We do say, okay, if we do nothing, our sales could go to this; and if we do something, our sales would be that. And that's how we measure that type of an impact, because the reality is under most competitive scenarios that if you wanted to just strictly look at that return without that type of sales, you'd never remodel a store that was going to have a competitive hit initially, and we all know that's the wrong thing to do in retail.

Okay. And then maybe switching gears a little bit.

Obviously, you guys have done a great job on keeping your customer, and I mean, maintaining relevance -- clearly, maintaining relevance with your customer, so that's not the issue. But I guess, what I'm wondering is, one of your peers has clearly experienced a situation where share repurchase-driven earnings growth doesn't really help the stock price.

And it seems their operating profit is obviously a much bigger driver of how your staff performed. So I guess, I'm kind of wondering, as I look to your year this year, it seems you're going to be kind of flattish on operating profit yet you are looking to do share repurchases.

Is that kind of the rate allocation of your capital? You don't really anticipate seeing much improvement in operating profit, maybe you should talk about how you think about that?

Karen, there's couple of components to why we do the share repurchases. We don't do share repurchases to drive our earnings per share up.

I mean, that's not our intent. What we have done over the past couple of years is we try to benchmark ourselves to our industry participants and what we've tried to do with our latest moves in increasing the dividend, as well as repurchasing shares was try to be more at par.

And obviously, we're not fully at par with where the number of the participants in the industry are doing, but we wanted to have programs in place that benchmark our return of capital to shareholders, whether that be through a dividend or through a share repurchase, to be more in line with our industry. And we're probably still not all the way up to the industry average in those -- in that area.

So we were looking to not give our shareholders a disincentive to invest in Spartan and keep that more focused on the operation. So our programs have been much more along that line than an attempt to increase operating earnings.

Thanks, Michael. In closing, I'd like to thank our associates for the hard work and our valued consumers, independent retailers, suppliers and shareholders for their continued support.

We'll continue to drive and improve our shares and earnings performance for our strategic initiatives and look forward to sharing our progress with all of you next quarter. Thanks.