10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED APRIL 18, 2015

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 333-191029

TOPS HOLDING II CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	46-2733709
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6363 Main Street, Williamsville, New York 14221	(716) 635-5000
(Address of principal executive offices, including zip code)	(Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 20, 2015, 126,559 shares of common stock of the registrant were outstanding.

TOPS HOLDING II CORPORATION

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION (Unaudited)
ITEM 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets as of April 18, 2015 and December 27, 2014	1
	Condensed Consolidated Statements of Comprehensive Loss for the 16-week periods ended April 18, 2015 and April 19, 2014	2
	Condensed Consolidated Statements of Cash Flows for the 16-week periods ended April 18, 2015 and April  19, 2014	3
	Notes to Condensed Consolidated Financial Statements	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4.	CONTROLS AND PROCEDURES	27
PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	28
ITEM 1A.	RISK FACTORS	28
ITEM 6.	EXHIBITS	28
SIGNATURE		29

i

PART I – FINANCIAL INFORMATION (Unaudited)

ITEM 1. FINANCIAL STATEMENTS

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

	April 18, 2015			December 27, 2014
Assets
Current assets:
Cash and cash equivalents	$	31,818		$	26,316
Accounts receivable, net		61,292			64,130
Inventory, net		141,514			149,284
Prepaid expenses and other current assets		14,521			11,172
Income taxes refundable		43			43
Current deferred tax assets		3,456			3,456
Total current assets		252,644			254,401
Property and equipment, net		380,091			385,889
Goodwill (Note 3)		212,901			212,901
Intangible assets, net (Note 3)		180,643			184,159
Other assets		13,735			15,033
Total assets	$	1,040,014		$	1,052,383
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	85,667		$	85,985
Accrued expenses and other current liabilities (Note 4)		96,922			82,110
Current portion of capital lease obligations (Note 5)		8,877			8,653
Current portion of long-term debt (Note 6)		2,010			1,983
Total current liabilities		193,476			178,731
Capital lease obligations (Note 5)		139,560			140,315
Long-term debt (Note 6)		641,539			664,130
Other long-term liabilities		34,185			33,591
Non-current deferred tax liabilities		45,923			45,383
Total liabilities		1,054,683			1,062,150
Commitments and contingencies (Note 10)
Common stock ($0.001 par value; 300,000 authorized shares, 126,560 shares issued and 126,559 shares outstanding as of April 18, 2015 and 126,560 shares issued and outstanding as of December 27, 2014)		—			—
Treasury stock (at cost; 1 share as of April 18, 2015)		(1	)		—
Paid-in capital		7,748			8,454
Accumulated deficit		(20,744	)		(16,549	)
Accumulated other comprehensive loss, net of tax		(1,672	)		(1,672	)
Total shareholders’ deficit		(14,669	)		(9,767	)
Total liabilities and shareholders’ deficit	$	1,040,014		$	1,052,383

See notes to condensed consolidated financial statements.

- 1 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Dollars in thousands)

(Unaudited)

	16-week periods ended
	April 18, 2015			April 19, 2014
Net sales	$	722,850		$	756,539
Cost of goods sold		(494,125	)		(526,635	)
Distribution costs		(14,260	)		(15,767	)
Gross profit		214,465			214,137
Operating expenses:
Wages, salaries and benefits		(109,456	)		(106,958	)
Selling and general expenses		(37,802	)		(41,452	)
Administrative expenses (inclusive of share-based compensation expense of $69 and $10)		(23,493	)		(20,076	)
Rent expense, net		(8,197	)		(8,218	)
Depreciation and amortization		(18,606	)		(17,779	)
Advertising		(5,835	)		(6,339	)
Gain on sale of assets (Note 8)		11,014			—
Total operating expenses		(192,375	)		(200,822	)
Operating income		22,090			13,315
Interest expense, net		(25,743	)		(25,077	)
Loss before income taxes		(3,653	)		(11,762	)
Income tax (expense) benefit		(542	)		4,136
Net loss		(4,195	)		(7,626	)
Other comprehensive income		—			—
Comprehensive loss	$	(4,195	)	$	(7,626	)

See notes to condensed consolidated financial statements.

- 2 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	16-week periods ended
	April 18, 2015			April 19, 2014
Cash flows provided by operating activities:
Net loss	$	(4,195	)	$	(7,626	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		22,118			20,747
Gain on sale of assets		(11,014	)		—
Amortization of deferred financing costs		1,298			1,184
Deferred income taxes		540			(4,153	)
Straight-line adjustment		309			352
LIFO inventory valuation adjustments		202			1,338
Share-based compensation expense		69			10
Other		341			253
Changes in operating assets and liabilities:
Decrease in accounts receivable		2,838			2,349
Decrease in inventory, net		7,327			2,579
Increase in prepaid expenses and other current assets		(3,349	)		(4,836	)
Decrease in income taxes refundable		—			52
(Decrease) increase in accounts payable		(100	)		1,828
Increase (decrease) in accrued expenses and other current liabilities		13,845			(8,168	)
Increase in other long-term liabilities		384			1,968
Net cash provided by operating activities		30,613			7,877
Cash flows provided by (used in) investing activities:
Cash paid for property and equipment		(9,934	)		(12,300	)
Cash proceeds from sale of assets		11,255			—
Net cash provided by (used in) investing activities		1,321			(12,300	)
Cash flows (used in) provided by financing activities:
Borrowings on 2017 ABL Facility		126,500			179,700
Repayments on 2017 ABL Facility		(148,500	)		(182,400	)
Principal payments on capital leases		(2,791	)		(2,663	)
Dividends to Tops MBO Corporation		(775	)		(2,382	)
Repayments of long-term debt borrowings		(647	)		(2,621	)
Change in bank overdraft position		(218	)		(65	)
Purchase of treasury stock		(1	)		—
Proceeds from sale leaseback financing transactions		—			12,750
Deferred financing costs paid		—			(211	)
Net cash (used in) provided by financing activities		(26,432	)		2,108
Net increase (decrease) in cash and cash equivalents		5,502			(2,315	)
Cash and cash equivalents-beginning of period		26,316			29,913
Cash and cash equivalents-end of period	$	31,818		$	27,598

See notes to condensed consolidated financial statements.

- 3 -

TOPS HOLDING II CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Tops Holding II Corporation (“Holding II,” or collectively with its subsidiaries, the “Company”), the parent of Tops Holding LLC (“Holding I”), formerly Tops Holding Corporation, was incorporated on May 7, 2013. Holding I is the parent of Tops Markets, LLC (“Tops Markets”), a supermarket retailer with supermarkets in Upstate New York, Northern Pennsylvania and Vermont. As of April 18, 2015, the Company operated 158 supermarkets, 157 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees. Holding II has no business operations other than the ownership of Holding I and as the issuer of the Holding II Notes (see Note 6).

Holding II is the reporting entity for the Holding I Notes and Holding II Notes (see Note 6). Tops MBO Corporation (“Tops MBO Co”), the parent Company of Holding II, is neither a co-issuer nor guarantor of these notes. Accordingly, the condensed consolidated financial statements have been prepared for Holding II and exclude the assets and results of operations of Tops MBO Co. Tops MBO Co’s assets consist solely of its investment in Holding II. Tops MBO Co has no operations other than as the equity owner of Holding II.

Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of Holding II for the fiscal year ended December 27, 2014, which appear in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2015.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions have been eliminated.

The Company operates on a 52/53 week fiscal year ending on the Saturday closest to December 30. Fiscal years include 13 four-week reporting periods, with an additional week in the thirteenth reporting period for 53-week fiscal years. The first quarter of each fiscal year includes four reporting periods, while the remaining quarters include three reporting periods.

The Company’s condensed consolidated financial statements for the 16-week periods ended April 18, 2015 and April 19, 2014 are unaudited, and in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary for a fair statement of financial position and results of operations for such periods.

Recently Issued Accounting Pronouncements

In April 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 changes the criteria for reporting discontinued operations and modifies related disclosure requirements. The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015, with early adoption permitted. The Company elected early adoption and there was no material impact to its consolidated financial statements as of April 18, 2015 and December 27, 2014.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. ASU No. 2014-09’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. The new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is currently assessing the potential impact of ASU No. 2014-09 on its financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which amended ASC 835 Subtopic 30 - Interest - Imputation of Interest to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. This guidance will be effective for the Company in the first quarter of the fiscal year ending December 31, 2016. Early adoption is permitted. The Company is currently in the process of evaluating the effect of adoption on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets,” which amended Accounting Standards Codification (“ASC”) 715 - Compensation - Retirement Benefits to permit entities with a fiscal year-end that does not coincide with a calendar month-end the ability to measure defined benefit plan assets and obligations as of the calendar month-end that is closest to the entity’s fiscal year-end and apply that measurement date consistently from year to year. This guidance will be effective for the Company in the first quarter of the fiscal year ending December 31, 2016. Early adoption is permitted. The Company is currently in the process of evaluating the effect of adoption on its the consolidated financial statements.

- 4 -

Segments

The Company’s supermarkets offer grocery, produce, frozen, dairy, meat, floral, seafood, health and beauty care, general merchandise, deli and bakery goods. The Company operates one supermarket format where each supermarket offers the same general mix of products with similar pricing to similar categories of customers. As of April 18, 2015, 49 corporate supermarkets offered pharmacy services and 51 corporate fuel centers were in operation. As of April 19, 2014, 76 corporate supermarkets offered pharmacy services and 48 corporate fuel centers were in operation. The Company’s retail operations, which represent substantially all of the Company’s consolidated sales, earnings and total assets, are its only operating segment and reportable segment. The Company’s retail operations as a whole reflect the level at which the business is managed and how the Company’s Chief Executive Officer, who acts as the Company’s chief operating decision maker, assesses performance internally.

The following table presents sales revenue by type of similar product (dollars in thousands):

	16-week periods ended
	April 18, 2015					April 19, 2014
	Amount		% of Total			Amount		% of Total
Non-perishables(1)	$	412,980		57.1	%	$	424,428		56.1	%
Perishables(2)		211,755		29.3	%		207,151		27.4	%
Fuel		46,154		6.4	%		68,083		9.0	%
Pharmacy		45,235		6.3	%		50,109		6.6	%
Other(3)		6,726		0.9	%		6,768		0.9	%
	$	722,850		100.0	%	$	756,539		100.0	%

(1) Non-perishables consist of grocery, dairy, frozen, general merchandise, health and beauty care and other non-perishable related products.

(2) Perishables consist of produce, meat, seafood, bakery, deli, floral, prepared foods and other perishable related products.

(3) Other primarily consists of franchise income and service commission income, such as lottery, money orders and money transfers.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and notes thereto. The most significant estimates used by management are related to the accounting for vendor allowances, valuation of long-lived assets including goodwill and intangible assets, acquisition accounting, lease classification, self-insurance reserves, inventory valuation and income taxes. Actual results could differ from these estimates.

Fair Value of Financial Instruments

The provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” establish a framework for measuring fair value and a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:

Level 1 – observable inputs such as quoted prices in active markets;

Level 2 – inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and

Level 3 – unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.

- 5 -

Financial instruments include cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term nature of these financial instruments. At April 18, 2015 and December 27, 2014, the carrying value and the estimated fair value of the Company’s debt instruments were as follows (dollars in thousands):

	April 18, 2015		December 27, 2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,010	$	1,983
Long-term debt		641,539		664,130
Total carrying value of long-term debt (Note 6)		643,549		666,113
Fair value of long-term debt		667,966		671,338
Excess of fair value over carrying value	$	24,417	$	5,225

The fair values of the Holding I Notes and Holding II Notes (see Note 6), which are included in long-term debt, were based on quoted market prices, a Level 2 source.

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of long-lived assets, goodwill and intangible assets. Long-lived assets and definite-lived intangible assets are measured at fair value on a nonrecurring basis using Level 3 inputs. Goodwill and the Tops tradename are reviewed annually for impairment on December 1, or more frequently if impairment indicators arise.

2. BUSINESS ACQUISITIONS

On December 1, 2013, Tops MBO Co consummated the purchase of substantially all of the common stock of Holding II (the “Management Purchase”) from Morgan Stanley Private Equity and other stockholders of Holdings II (the “Sellers”). As a result of the Management Purchase, primarily through their ownership of Tops MBO Co, members of management now beneficially own all of the outstanding common stock of Holding II. Accordingly, the Company was required to apply “push down” accounting, with the results of the Management Purchase reflected in Holding II’s condensed consolidated financial statements. The application of “push down” accounting has resulted in a new basis of accounting in which the total purchase price paid by Tops MBO Co has been allocated to the assets acquired and liabilities assumed using estimates of their fair values under the acquisition method of accounting in accordance with ASC 805, “Business Combinations”. In addition to the cash consideration of $20.9 million paid to the Sellers, the Company incurred $15.8 million of transaction fees during late 2013 in connection with the Management Purchase. Transaction fees of $0.6 million were paid during the 4-week period ended December 28, 2013, $15.0 million of transaction fees were paid during the 16-week period ended April 19, 2014, and the remaining $0.2 million were paid during the 12-week period ended July 12, 2014.

As disclosed in the Company’s audited consolidated financial statements for the fiscal year ended December 27, 2014, which appear in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2015, the purchase price allocation for the Management Purchase was finalized during the fourth quarter of 2014. Previously reported results have been retroactively adjusted to reflect the finalization of the acquisition date fair values of property and equipment and intangible assets. This finalization resulted in reductions of depreciation and amortization expense of $4.4 million during the 16-week period ended April 19, 2014. The finalization also resulted in the increase of income tax benefit of $1.6 million during the 16-week period ended April 19, 2014. The combined impact of the depreciation and amortization expense and income tax benefit adjustments resulted in a $6.0 million reduction in the Company’s net loss during the 16-week period ended April 19, 2014.

- 6 -

3. GOODWILL AND INTANGIBLE ASSETS, NET

The following table summarizes the change in the Company’s goodwill balance during the 16-week period ended April 18, 2015 (dollars in thousands):

Balance – December 27, 2014	$	212,901
Adjustments		—
Balance – April 18, 2015	$	212,901

Goodwill is reviewed annually for impairment on December 1, or more frequently upon the occurrence of trigger events. Based on the Company’s assessment, no goodwill impairment was recorded during the 16-week periods ended April 18, 2015 and April 19, 2014.

Intangible assets, net of accumulated amortization, consist of the following (dollars in thousands):

April 18, 2015	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Amortization Period
Tradename – indefinite	$	131,200	$	—		$	131,200		Indefinite life
Customer relationships		29,200		(9,800	)		19,400		14.0
Favorable lease rights		21,600		(4,203	)		17,397		9.0
Franchise agreements		13,300		(2,647	)		10,653		14.0
Pharmacy scripts		2,800		(807	)		1,993		14.0
	$	198,100	$	(17,457	)	$	180,643		11.8

December 27, 2014	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradename – indefinite	$	131,200	$	—		$	131,200
Customer relationships		29,200		(7,913	)		21,287
Favorable lease rights		21,600		(3,269	)		18,331
Franchise agreements		13,300		(2,115	)		11,185
Pharmacy scripts		2,800		(644	)		2,156
	$	198,100	$	(13,941	)	$	184,159

The Tops tradename is reviewed annually for impairment on December 1, or more frequently, if impairment indicators arise. Based on the Company’s assessment, no impairment was recorded during the 16-week periods ended April 18, 2015 and April 19, 2014.

- 7 -

During the 16-week periods ended April 18, 2015 and April 19, 2014, amortization expense related to intangible assets was $3.5 million and $4.0 million, respectively. This amortization is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss.

Contra-expense of $0.1 million of related to the amortization of unfavorable lease rights, which are classified in other long-term liabilities in the condensed consolidated balance sheets, is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss during the 16-week periods ended April 18, 2015 and April 19, 2014. Expected future amortization of these unfavorable lease rights is contra-expense of $0.2 million in the remaining period of Fiscal 2015, $0.3 million in Fiscal 2016, $0.3 million in Fiscal 2017, $0.3 million in Fiscal 2018, $0.3 million in Fiscal 2019 and $0.8 million thereafter.

As of April 18, 2015, expected future amortization of intangible assets is as follows (dollars in thousands):

2015 (remaining period)	$	7,882
2016		8,201
2017		6,959
2018		5,920
2019		4,966
Thereafter		15,515

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (dollars in thousands):

	April 18, 2015		December 27, 2014
Wages, taxes and benefits	$	19,148	$	18,951
Interest payable		18,676		2,269
Lottery		12,803		10,954
Union medical, pension and 401(k)		9,194		8,985
Self-insurance reserves		6,130		6,130
Property and equipment expenditures		4,350		3,383
Gift cards		3,554		8,974
Professional and legal fees		3,332		3,170
Utilities		3,085		3,383
Sales and use tax		3,013		596
Repairs and maintenance		1,848		2,212
Money orders		864		887
Other		10,925		12,216
	$	96,922	$	82,110

5. CAPITAL LEASE OBLIGATIONS

The Company has a number of capital leases in effect for supermarket properties and equipment. The initial lease terms generally range up to twenty-five years and will expire at various times through 2035, with options to renew for additional periods. The majority of the supermarket leases provide for base rental, plus real estate taxes, insurance, common area maintenance and other operating expenses applicable to the leased premises. Some leases contain escalation clauses for future rents and contingent rents based on sales volume.

As of April 18, 2015, future minimum lease rental payments applicable to non-cancelable capital and operating leases, and expected minimum sublease rental income, were as follows (dollars in thousands):

2015 (remaining period)	$	21,709
2016		30,358
2017		27,139
2018		23,361
2019		20,686
Thereafter		108,445
Total minimum lease payments		231,698
Less amounts representing interest		(152,853	)
Present value of net minimum lease payments		78,845
Less current obligations		(8,877	)
Long-term cash obligations		69,968
Non-cash obligations		69,592
Total long-term capital lease obligations	$	139,560

- 8 -

The Company entered into build-to-suit and sale-leaseback transactions in various years involving certain properties that did not qualify for sale-leaseback accounting as the lease agreements included various forms of continuing involvement. These transactions include the sale-leaseback of three properties for cash proceeds of $12.8 million during the 16-week period ended April 19, 2014. These transactions have been classified as financing transactions in accordance with ASC Topic 840, “Leases,” due to the existence of prohibited forms of continuing involvement.

Under the financing method, the assets remain on the consolidated balance sheet and proceeds received by the Company from these transactions are recorded as capital lease obligations, allocated between land, as applicable, and building. Payments under these leases are applied as payments of imputed interest and deemed principal on the underlying building obligations, with no underlying cash payments deemed attributable to the land obligations and the estimated net book value of the buildings at the conclusion of the lease terms. The related land assets are not depreciated, and at the end of the lease terms, the remaining capital lease obligations will equal the combined net book values of the land and buildings. At the expiration of the lease terms, which range from 2021 to 2068, or when the Company’s continuing involvement under the lease agreements ends, the related land, buildings and capital lease obligations will be removed from the consolidated balance sheet, with no underlying cash payments. These capital lease obligations are reflected as non-cash obligations in the preceding table.

6. DEBT

Long-term debt is comprised of the following (dollars in thousands):

	April 18, 2015			December 27, 2014
Holding I Notes	$	460,000		$	460,000
Holding II Notes		150,000			150,000
Discount on Holding II Notes		(1,017	)		(1,100	)
2017 ABL Facility		30,000			52,000
Other loans		4,566			5,213
Total debt		643,549			666,113
Current portion		(2,010	)		(1,983	)
Total long-term debt	$	641,539		$	664,130

On May 15, 2013, Holding II issued $150.0 million of unsecured senior notes, bearing annual cash interest of 8.75% (the “Holding II Notes”). If certain conditions are met, Holding II may be entitled to pay interest on the Holding II Notes by increasing the principal of the notes or by issuing new notes as pay-in-kind interest. This interest would accrue at an annual rate of 9.50%. The $148.5 million proceeds from the Holding II Notes issuance, net of a $1.5 million original issue discount, were used to pay a $141.9 million, or $980 per share, dividend to the Holding II shareholders. The Holding II Notes mature June 15, 2018 and require semi-annual interest payments on June 15 and December 15. To the extent permitted by the agreements governing the Holding I Notes (see below) and the 2017 ABL Facility (see below), Holding I may make dividend payments to Holding II to fund the semi-annual interest payments related to the Holding II Notes. The Holding II Notes are redeemable, in whole or in part, at any time on or after June 15, 2015 at specified redemption prices. Prior to June 15, 2015, the Company may redeem some or all of the Holding II Notes at a specified “make-whole” premium.

On December 20, 2012, Holding I and Tops Markets (collectively, the “Issuers”) issued $460.0 million of senior secured notes, bearing annual interest of 8.875% (the “Holding I Notes”). Effective May 15, 2013, Tops Markets II Corporation was added as a co-issuer of the Holding I Notes. On August 20, 2013, Holding II was added as a guarantor of the Holding I Notes. The proceeds from the Holding I Notes were used to redeem the previously outstanding $350.0 million senior secured notes, pay a $100.0 million dividend to the Holding I shareholders and pay fees and expenses related to the notes issuance. The Holding I Notes mature December 15, 2017 and require semi-annual interest payments on June 15 and December 15. The Holding I Notes are redeemable, in whole or in part, at any time on or after June 15, 2015 at specified redemption prices. Prior to June 15, 2015, the Issuers may redeem some or all of the Holding I Notes at a specified “make-whole” premium.

- 9 -

The Holding I Notes are collateralized by (i) first priority interests, subject to certain exceptions and permitted liens, in the stock held by Holding II, the Issuers, Tops Markets II Corporation and the guarantor subsidiaries, Tops PT, LLC, Tops Gift Card Company, LLC and Erie Logistics, LLC (collectively, the “Guarantors”), the Company’s warehouse and distribution facility in Lancaster, New York, the Company’s retail facility located in Fayetteville, New York and certain owned real property acquired by the Issuers and the Guarantors following the issue date of the Holding I Notes, equipment, intellectual property, and substantially all other assets of the Issuers and the Guarantors, other than assets securing the Company’s asset-based revolving credit facility (the “2017 ABL Facility”) on a first priority basis (collectively, the “Holding I Notes Priority Collateral”), and (ii) second priority interests, subject to certain exceptions and permitted liens, in the assets of the Issuers and the Guarantors that secure the 2017 ABL Facility on a first priority basis, including present and future receivables, deposit accounts, inventory, prescription lists, and certain rights and proceeds relating thereto (collectively, the “ABL Priority Collateral”).

On December 14, 2012, Tops Markets entered into the 2017 ABL Facility with Bank of America, N.A. as collateral agent and administrative agent. The 2017 ABL Facility allows a maximum borrowing capacity of $125.0 million, subject to a borrowing base calculation, with an option for up to $50.0 million of additional borrowing capacity if certain conditions are met. The borrowing base includes inventory, pharmacy prescription files and certain receivables. The 2017 ABL Facility will mature on December 14, 2017.

As of April 18, 2015, the unused availability under the 2017 ABL Facility was $46.9 million, after giving effect to the borrowing base calculation, $23.9 million of letters of credit outstanding and $30.0 million borrowings outstanding. As of December 27, 2014, $20.7 million of letters of credit were outstanding under the 2017 ABL Facility. Revolving loans under the 2017 ABL Facility, at the Company’s option, bear interest at either LIBOR plus a margin of 150 to 200 basis points, determined based on levels of borrowing availability, or the prime rate plus a margin of 50 to 100 basis points, determined based on levels of borrowing availability. As of April 18, 2015 and December 27, 2014, the weighted average interest rates on borrowings under the 2017 ABL Facility were 2.02% and 2.24%, respectively. The 2017 ABL Facility is collateralized primarily by (i) first priority interests, subject to certain exceptions and permitted liens, in the ABL Priority Collateral, and (ii) second priority interests, subject to certain exceptions and permitted liens, in the Holding I Notes Priority Collateral.

The instruments governing the Holding II Notes, Holding I Notes and the 2017 ABL Facility impose customary affirmative and negative covenants on the Company, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sale or transfer of assets, payment of dividends, transactions involving affiliates, and obligations on a change in control. Failure to meet any of these covenants would be an event of default. On August 19, 2014, the 2017 ABL Facility was amended to reduce specified restrictions on the Company’s ability to make certain payments, including dividends.

On November 29, 2013, Tops MBO Co entered into a $12.3 million term loan (“MBO Co Loan”) to partially fund the Management Purchase. The MBO Co Loan bore cash interest of LIBOR plus a margin of 300 basis points, with six scheduled quarterly principal and interest payments that began March 31, 2014. Holding II and its subsidiaries were neither co-issuers nor guarantors of the MBO Co Loan, and none of the assets or stock of Holding II were pledged as collateral for the MBO Co Loan. Accordingly, the MBO Co Loan was not pushed down to the consolidated financial statements of Holding II. The remaining principal balance on the MBO Co Loan, along with accrued and unpaid interest, was repaid in full on September 25, 2014.

7. INCOME TAXES

Income tax (expense) benefit was as follows (dollars in thousands):

	16-week periods ended
	April 18, 2015			April 19, 2014
Current	$	(2	)	$	(17	)
Deferred		(540	)		4,153
Total income tax (expense) benefit	$	(542	)	$	4,136

Based on an assessment of positive and negative evidence regarding the realization of the Company’s deferred tax assets, the Company continues to maintain a full valuation allowance against total net deferred tax assets, and consequently, the Company recognized no income tax benefit during the 16-week period ended April 18, 2015. The income tax expense recognized for the 16-week period ended April 18, 2015 primarily reflects the recognition of additional valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities. The effective tax rate would have been 38.7% without the establishment of the valuation allowance.

The Company recognized income tax benefit during the 16-week period ended April 19, 2014 as a result of the Management Purchase yielding larger intangible asset values, which drove the Company into a net deferred tax liability position (excluding the Company’s indefinite-lived tradename and goodwill deferred tax liabilities). The income tax benefit recognized for the 16-week period ended April 19, 2014 primarily reflects the loss before income taxes, net of the establishment of valuation allowance against deferred tax assets, primarily reflecting the recognition of valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities. The overall effective tax rate was 35.2%. The effective tax rate would have been 42.0% without the impact of the valuation allowance establishment.

As of the beginning of fiscal year 2015, the Company had U.S. federal and state net operating loss carryforwards of $45.7 million and $41.9 million, respectively, which expire beginning in 2026. In addition, the Company had federal tax credits of $4.6 million, which expire beginning in 2026.

- 10 -

8. GAIN ON SALE OF ASSETS

During January 2015, the Company sold pharmacy scripts and inventory related to 27 of its in-store pharmacy locations for cash proceeds of $14.9 million. These pharmacies were then closed. A resulting gain on sale of assets of $11.0 million, net of the carrying value of sold inventory of $3.2 million and direct selling expenses of $0.7 million, was recognized in the condensed consolidated statement of comprehensive loss for the 16-week period ended April 18, 2015.

9. SHAREHOLDERS’ DEFICIT

On January 8, 2015, the Company paid a dividend of $0.8 million to Tops MBO Co to repurchase outstanding common stock shares of Tops MBO Co from a former Company executive. In addition, one outstanding common stock share of Holding II was repurchased.

10. COMMITMENTS AND CONTINGENCIES

Multiemployer Pension Plan

On December 22, 2013, Tops Markets acquired all of the membership interests of Erie Logistics, LLC (“Erie Logistics”) and certain other assets from C&S Wholesale Grocers, Inc. (“C&S”). Erie Logistics operates the Company’s warehouse and distribution facilities located in Lancaster and Cheektowaga, New York and employs the warehouse and driver personnel at these facilities, all of whom are represented by Teamsters Local 264. Under its supply agreement with Tops Markets, C&S, through Erie Logistics, had operated these facilities since 2002.

In late January 2014, the Company received notice that the New York State Teamsters Conference Pension and Retirement Fund (the “Fund”) had suspended Erie Logistics as a participating employer in the Fund pending the Fund’s investigation into the acquisition of Erie Logistics from C&S. This suspension was retroactive to the effective date of the acquisition. During this “suspension” and thereafter through the date of this Quarterly Report on form 10-Q, Erie Logistics has continued to make contributions to the Fund as required by the collective bargaining agreements with Teamsters Local 264. The Fund has rejected and returned these contributions. During the 16-week periods ended April 18, 2015 and April 19, 2014, these rejected contributions totaled $1.6 million and $1.4 million, respectively. On May 27, 2014, the Fund provided Erie Logistics and C&S with notice of its determination that Erie Logistics incurred employer withdrawal liability as a result of the acquisition. The notice provides that Erie Logistics owes withdrawal liability of $183.7 million, payable in a lump sum or in monthly installments, calculated to give effect to a limit on total withdrawal liability imposed by the Employee Retirement Income Security Act (“ERISA”), of $641,514 for 240 months.

The Company believes that the Fund’s determination of a withdrawal violates ERISA, the existing participation agreements between Erie Logistics and the Fund, and the fiduciary duties of the trustees of the Fund. The Company is vigorously contesting this determination, initially through mandatory arbitration under ERISA.

The Company has not recorded any reserve for this matter as a loss is not considered probable. If it were ultimately determined that Erie Logistics has incurred a withdrawal liability to the Fund, the Company would bear financial responsibility for this liability. Under the terms of the purchase agreement for the acquisition of Erie Logistics from C&S, and as a continuation of our prior contractual obligations, the Company retains the obligation to indemnify C&S in the event withdrawal liability is imposed on Erie Logistics, the Company or C&S. During the pendency of the proceeding to contest the withdrawal determination, ERISA requires that conditional monthly payments of withdrawal liability be made, which began July 28, 2014. The monthly conditional payments of withdrawal liability, totaling $1.9 million during the 16-week period ended April 18, 2015, are in addition to pension contributions the Company is required to make for the benefit of Erie Logistics’ associates under the collective bargaining agreements with Teamsters Local 264 which, as noted, the Fund has refused to accept. The aggregate conditional monthly payments of withdrawal liability, totaling $ 5.8 million as of April 18, 2015, have been recorded in accounts receivable, while the aggregate rejected contributions, totaling $ 5.8 million as of April 18, 2015, have been recorded in accrued expenses and other current liabilities within our condensed consolidated balance sheet.

On July 28, 2014, Teamsters Local 264 filed a grievance charging a violation of its collective bargaining agreements by reason of the Company’s failing to participate in the Fund.

- 11 -

Purchase Commitments

Effective December 22, 2013, in connection with its purchase of all the membership interests of Erie Logistics and certain other assets from C&S, the Company modified its existing supply agreement with C&S whereby it will resume warehousing and transportation functions, while C&S will continue to provide procurement and purchasing services in support of the majority of the Company’s supply chain. This modified supply agreement sets out the parties’ respective responsibilities for the procurement and purchase of merchandise intended for use or resale in our supermarkets. In consideration for the services it provides under the agreement, C&S is paid a fee based on all merchandise procured and also has incentive income opportunities. Effective April 1, 2015, the Company and C&S agreed in principal to amend certain operating terms of the supply agreement and extend the term of the agreement through April 1, 2020. A supply agreement amendment reflecting these terms is expected to be formalized and executed during the Company’s second fiscal quarter.

On September 24, 2012, the Company entered into a supplemental supply agreement with C&S to provide similar services in support of the 21 supermarkets acquired from GU Markets in October 2012. This agreement expires on September 23, 2022.

Effective May 1, 2013, Tops Markets entered into a member participation agreement with Topco, a procurement cooperative for food retailers and wholesalers, for the supply of substantially all of the Company’s prescription drugs. Tops Markets must purchase 95% of its branded prescription drugs and 95% of its generic pharmaceutical products through Topco. This agreement expires February 28, 2017.

Effective July 24, 2010, the Company extended its existing IT outsourcing agreement with HP Enterprise Services, LLC (formerly known as Electronic Data Systems, LLC), or HP, through December 31, 2017 to provide a wide range of information systems services. Under the agreement, HP provides data center operations, mainframe processing, business applications and systems development to enhance the Company’s customer service and efficiency. The charges under this agreement are based upon the services requested at predetermined rates.

The costs of these purchase commitments are not reflected in the Company’s consolidated balance sheets.

Environmental Liabilities

The Company is contingently liable for potential environmental issues of some of its properties. As the Company is unaware of environmental issues that are expected to materially impact the Company’s condensed consolidated financial statements as a whole, no amounts were accrued as of April 18, 2015 or December 27, 2014.

Collective Bargaining Agreements

The Company employs approximately 15,000 associates. Approximately 83% of these associates are members of United Food and Commercial Workers, or UFCW, District Union Local One, or Local One, or two other UFCW unions. Approximately 4% are members of Teamsters Local 264, working within our warehouse and distribution facilities. All other associates are non-union. The Company is a party to five collective bargaining agreements with Local One expiring between October 2015 and July 2017. The Company has two non-Local One UFCW collective bargaining agreements that expire in April 2016 and February 2018. The Company is also a party to three collective bargaining agreements with Teamsters Local 264 expiring in August 2019.

Legal Proceedings

Except as otherwise disclosed in this note, the Company is unaware of legal proceedings that are expected to materially impact the Company’s consolidated financial statements as a whole. No amounts related to legal proceedings were accrued as of April 18, 2015 or December 27, 2014.

- 12 -

11. GUARANTOR FINANCIAL STATEMENTS

The obligations of Holding I, Tops Markets and Tops Markets II Corporation under the Holding I Notes are jointly and severally, fully and unconditionally guaranteed by Holding II, the parent of Holding I, and Tops Gift Card Company, LLC, Tops PT, LLC and Erie Logistics, LLC (the “Guarantor Subsidiaries”), 100% owned subsidiaries of Tops Markets. Holding II was established in May 2013, Tops Gift Card Company, LLC was established in October 2008, Tops PT, LLC was established in January 2010, and Erie Logistics, LLC was acquired in December 2013. Tops Markets and Tops Markets II Corporation are joint issuers of the Holding I Notes and are 100% owned by Holding I. Separate financial statements of Holding II, Holding I, Tops Markets, Tops Markets II Corporation and the Guarantor Subsidiaries are not presented as the guarantees are full and unconditional, subject to customary release provisions, and Holding II and the Guarantor Subsidiaries are jointly and severally liable thereon.

The following supplemental financial information sets forth, on a condensed consolidating basis, balance sheets as of April 18, 2015 and December 27, 2014 for Holding II, Holding I, Tops Markets, the Guarantor Subsidiaries, and for the Company, statements of comprehensive loss for the 16-week periods ended April 18, 2015 and April 19, 2014, and statements of cash flows for the 16-week periods ended April 18, 2015 and April 19, 2014. Supplemental financial information has not been presented for Tops Markets II Corporation as it is a finance subsidiary.

- 13 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

APRIL 18, 2015

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC		Tops Markets, LLC		Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	—	$	30,965	$	853	$	—		$	31,818
Accounts receivable, net		—			—		47,312		13,980		—			61,292
Intercompany receivables		—			—		36,993		5,205		(42,198	)		—
Inventory, net		—			—		106,037		35,477		—			141,514
Prepaid expenses and other current assets		—			—		11,503		3,018		—			14,521
Income taxes refundable		—			—		43		—		—			43
Current deferred tax assets		—			—		3,456		—		—			3,456
Total current assets		—			—		236,309		58,533		(42,198	)		252,644
Property and equipment, net		—			—		318,117		61,974		—			380,091
Goodwill		—			—		47,081		165,820		—			212,901
Intangible assets, net		—			—		134,580		46,063		—			180,643
Other assets		4,723			—		9,012		3,041		(3,041	)		13,735
Investment in subsidiaries		134,075			139,775		214,028		—		(487,878	)		—
Total assets	$	138,798		$	139,775	$	959,127	$	335,431	$	(533,117	)	$	1,040,014
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	—		$	—	$	68,277	$	17,390	$	—		$	85,667
Intercompany payables		—			5,700		5,205		31,293		(42,198	)		—
Accrued expenses and other current liabilities		4,484			—		73,495		18,943		—			96,922
Current portion of capital lease obligations		—			—		8,752		125		—			8,877
Current portion of long-term debt		—			—		1,978		32		—			2,010
Total current liabilities		4,484			5,700		157,707		67,783		(42,198	)		193,476
Capital lease obligations		—			—		122,134		17,426		—			139,560
Long-term debt		148,983			—		495,064		533		(3,041	)		641,539
Other long-term liabilities		—			—		28,581		5,604		—			34,185
Non-current deferred tax liabilities		—			—		15,866		30,057		—			45,923
Total liabilities		153,467			5,700		819,352		121,403		(45,239	)		1,054,683
Total shareholders’ (deficit) equity		(14,669	)		134,075		139,775		214,028		(487,878	)		(14,669	)
Total liabilities and shareholders’ (deficit) equity	$	138,798		$	139,775	$	959,127	$	335,431	$	(533,117	)	$	1,040,014

- 14 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 27, 2014

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC		Tops Markets, LLC		Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	—	$	25,497	$	819	$	—		$	26,316
Accounts receivable, net		—			—		52,068		12,062		—			64,130
Intercompany receivables		—			—		44,544		7,093		(51,637	)		—
Inventory, net		—			—		111,468		37,816		—			149,284
Prepaid expenses and other current assets		—			—		7,949		3,223		—			11,172
Income taxes refundable		—			—		43		—		—			43
Current deferred tax assets		—			—		3,456		—		—			3,456
Total current assets		—			—		245,025		61,013		(51,637	)		254,401
Property and equipment, net		—			—		322,186		63,703		—			385,889
Goodwill		—			—		47,081		165,820		—			212,901
Intangible assets, net		—			—		137,004		47,155		—			184,159
Other assets		5,115			—		9,918		3,041		(3,041	)		15,033
Investment in subsidiaries		134,492			140,192		210,699		—		(485,383	)		—
Total assets	$	139,607		$	140,192	$	971,913	$	340,732	$	(540,061	)	$	1,052,383
Liabilities and Shareholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	—		$	—	$	67,826	$	18,159	$	—		$	85,985
Intercompany payables		—			5,700		7,093		38,844		(51,637	)		—
Accrued expenses and other current liabilities		474			—		59,972		21,664		—			82,110
Current portion of capital lease obligations		—			—		8,532		121		—			8,653
Current portion of long-term debt		—			—		1,951		32		—			1,983
Total current liabilities		474			5,700		145,374		78,820		(51,637	)		178,731
Capital lease obligations		—			—		122,849		17,466		—			140,315
Long-term debt		148,900			—		517,730		541		(3,041	)		664,130
Other long-term liabilities		—			—		28,259		5,332		—			33,591
Non-current deferred tax liabilities		—			—		17,509		27,874		—			45,383
Total liabilities		149,374			5,700		831,721		130,033		(54,678	)		1,062,150
Total shareholders’ (deficit) equity		(9,767	)		134,492		140,192		210,699		(485,383	)		(9,767	)
Total liabilities and shareholders’ (deficit) equity	$	139,607		$	140,192	$	971,913	$	340,732	$	(540,061	)	$	1,052,383

- 15 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE 16-WEEK PERIOD ENDED APRIL 18, 2015

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC		Tops Markets, LLC			Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—	$	560,028		$	163,201		$	(379	)	$	722,850
Cost of goods sold		—			—		(385,566	)		(108,559	)		—			(494,125	)
Distribution costs		—			—		(11,065	)		(3,195	)		—			(14,260	)
Gross profit		—			—		163,397			51,447			(379	)		214,465
Operating expenses:
Wages, salaries and benefits		—			—		(82,507	)		(26,949	)		—			(109,456	)
Selling and general expenses		—			—		(28,299	)		(9,882	)		379			(37,802	)
Administrative expenses		—			—		(18,266	)		(5,227	)		—			(23,493	)
Rent expense, net		—			—		(5,433	)		(2,764	)		—			(8,197	)
Depreciation and amortization		—			—		(15,097	)		(3,509	)		—			(18,606	)
Advertising		—			—		(4,549	)		(1,286	)		—			(5,835	)
Gain on sale of assets		—			—		6,877			4,137			—			11,014
Total operating expenses		—			—		(147,274	)		(45,480	)		379			(192,375	)
Operating income		—			—		16,123			5,967			—			22,090
Interest expense, net		(4,485	)		—		(20,804	)		(454	)		—			(25,743	)
Equity income from subsidiaries		290			290		3,330			—			(3,910	)		—
(Loss) income before income taxes		(4,195	)		290		(1,351	)		5,513			(3,910	)		(3,653	)
Income tax benefit (expense)		—			—		1,641			(2,183	)		—			(542	)
Net (loss) income		(4,195	)		290		290			3,330			(3,910	)		(4,195	)
Other comprehensive income		—			—		—			—			—			—
Comprehensive (loss) income	$	(4,195	)	$	290	$	290		$	3,330		$	(3,910	)	$	(4,195	)

- 16 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE 16-WEEK PERIOD ENDED APRIL 19, 2014

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC			Tops Markets, LLC			Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	585,334		$	171,581		$	(376	)	$	756,539
Cost of goods sold		—			—			(412,591	)		(114,044	)		—			(526,635	)
Distribution costs		—			—			(12,129	)		(3,638	)		—			(15,767	)
Gross profit		—			—			160,614			53,899			(376	)		214,137
Operating expenses:
Wages, salaries and benefits		—			—			(79,906	)		(27,052	)		—			(106,958	)
Selling and general expenses		—			—			(31,450	)		(10,378	)		376			(41,452	)
Administrative expenses		—			—			(15,193	)		(4,883	)		—			(20,076	)
Rent expense, net		—			—			(5,368	)		(2,850	)		—			(8,218	)
Depreciation and amortization		—			—			(14,657	)		(3,122	)		—			(17,779	)
Advertising		—			—			(4,885	)		(1,454	)		—			(6,339	)
Total operating expenses		—			—			(151,459	)		(49,739	)		376			(200,822	)
Operating income		—			—			9,155			4,160			—			13,315
Interest expense, net		(4,441	)		—			(20,579	)		(57	)		—			(25,077	)
Equity (loss) income from subsidiaries		(3,185	)		(3,185	)		2,478			—			3,892			—
(Loss) income before income taxes		(7,626	)		(3,185	)		(8,946	)		4,103			3,892			(11,762	)
Income tax benefit (expense)		—			—			5,761			(1,625	)		—			4,136
Net (loss) income		(7,626	)		(3,185	)		(3,185	)		2,478			3,892			(7,626	)
Other comprehensive income		—			—			—			—			—			—
Comprehensive (loss) income	$	(7,626	)	$	(3,185	)	$	(3,185	)	$	2,478		$	3,892		$	(7,626	)

- 17 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE 16-WEEK PERIOD ENDED APRIL 18, 2015

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC			Tops Markets, LLC			Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	—		$	—		$	27,172		$	3,441		$	—		$	30,613
Cash flows provided by investing activities:
Cash paid for property and equipment		—			—			(8,733	)		(1,201	)		—			(9,934	)
Cash proceeds from sale of assets		—			—			7,751			3,504			—			11,255
Change in intercompany receivables position		—			—			7,551			1,888			(9,439	)		—
Net cash provided by investing activities		—			—			6,569			4,191			(9,439	)		1,321
Cash flows used in by financing activities:
Capital contributions		776			776			—			—			(1,552	)		—
Dividends		(775	)		(776	)		(776	)		—			1,552			(775	)
Purchase of treasury stock		(1	)		—			—			—			—			(1	)
Borrowings on 2017 ABL Facility		—			—			126,500			—			—			126,500
Repayments on 2017 ABL Facility		—			—			(148,500	)		—			—			(148,500	)
Principal payments on capital leases		—			—			(2,752	)		(39	)		—			(2,791	)
Repayments of long-term debt borrowings		—			—			(639	)		(8	)		—			(647	)
Change in bank overdraft position		—			—			(218	)		—			—			(218	)
Change in intercompany payables position		—			—			(1,888	)		(7,551	)		9,439			—
Net cash used in financing activities		—			—			(28,273	)		(7,598	)		9,439			(26,432	)
Net increase in cash and cash equivalents		—			—			5,468			34			—			5,502
Cash and cash equivalents – beginning of period		—			—			25,497			819			—			26,316
Cash and cash equivalents – end of period	$	—		$	—		$	30,965		$	853		$	—			31,818

- 18 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE 16-WEEK PERIOD ENDED APRIL 19, 2014

(Dollars in thousands)

	Tops Holding II Corporation			Tops Holding LLC			Tops Markets, LLC			Guarantor Subsidiaries			Eliminations			Consolidated
Net cash (used in) provided by operating activities	$	—		$	—		$	(2,505	)	$	10,382		$	—		$	7,877
Cash flows provided by (used in) investing activities:
Cash paid for property and equipment		—			—			(11,662	)		(638	)		—			(12,300	)
Change in intercompany receivables position		—			—			20,694			1,930			(22,624	)		—
Net cash provided by (used in) investing activities		—			—			9,032			1,292			(22,624	)		(12,300	)
Cash flows (used in) provided by financing activities:
Capital contributions		2,382			2,382			—			—			(4,764	)		—
Dividend		(2,382	)		(2,382	)		(2,382	)		—			4,764			(2,382	)
Borrowings on 2017 ABL Facility		—			—			179,700			—			—			179,700
Repayments on 2017 ABL Facility		—			—			(182,400	)		—			—			(182,400	)
Proceeds from sale leaseback financing transactions		—			—			3,616			9,134			—			12,750
Principal payments on capital leases		—			—			(2,520	)		(143	)		—			(2,663	)
Repayments of long-term debt borrowings		—			—			(2,613	)		(8	)		—			(2,621	)
Deferred financing costs paid		—			—			(211	)		—			—			(211	)
Change in bank overdraft position		—			—			(65	)		—			—			(65	)
Change in intercompany payables position		—			—			(1,930	)		(20,694	)		22,624			—
Net cash (used in) provided by financing activities		—			—			(8,805	)		(11,711	)		22,624			2,108
Net decrease in cash and cash equivalents		—			—			(2,278	)		(37	)		—			(2,315	)
Cash and cash equivalents – beginning of period		—			—			29,051			862			—			29,913
Cash and cash equivalents – end of period	$	—		$	—		$	26,773		$	825		$	—		$	27,598

- 19 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q (the “10-Q”).

We are a leading supermarket retailer in Upstate New York, Northern Pennsylvania and Vermont. Introduced in 1962, our Tops brand is widely recognized as a strong retail supermarket brand name in our market area, supported by strong customer loyalty and attractive supermarket locations. As of April 18, 2015, we operated 158 full-service supermarkets, 157 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees under the Tops banner.

On November 14, 2013, Morgan Stanley Private Equity and other stockholders of Holding II, Tops MBO Corporation (“Tops MBO Co”) and Holding II signed a Purchase and Sale Agreement pursuant to which Tops MBO Co agreed to purchase substantially all of the outstanding common stock of Holding II (the “Management Purchase”). Tops MBO Co is owned and controlled by members of our management. The Management Purchase closed effective December 1, 2013. Prior to the Management Purchase, members of management owned approximately 7% of the outstanding equity interests in Holding II. As a result of the Management Purchase, management now beneficially owns all of the outstanding equity interests of Holding II.

Forward-Looking Statements

This 10-Q includes forward-looking statements, which are generally statements about future events, plans, objectives and performance. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements. Forward-looking statements reflect our current expectations, based on currently available information, and are not guarantees. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, the following:

• current economic conditions and the impact on consumer demand and spending and our pricing strategy;

• pricing and market strategies, the expansion, consolidation and other activities of competitors, and our ability to respond to the promotional practices of competitors;

• our ability to effectively increase or maintain our profit margins;

• the success of our store acquisition, construction and remodel programs;

• fluctuations in utility, fuel and commodity prices which could impact consumer spending and buying habits and the cost of doing business;

• risks inherent in our fuel station operations;

• our exposure to local economies and other adverse conditions due to our geographic concentration;

• risks of natural disasters and severe weather conditions;

• supply problems with our suppliers and vendors;

• our relationships with unions and unionized employees, and the terms of future collective bargaining agreements or labor strikes;

• increased operating costs resulting from increases in the minimum wage, rising employee benefit costs or pension funding obligations;

• changes in, or the failure or inability to comply with, laws and governmental regulations applicable to the operation of our pharmacy and other businesses;

- 20 -

• the adequacy of our insurance coverage against claims of our customers in connection with our pharmacy services;

• estimates of the amount and timing of payments under our self-insurance policies;

• risks of liability under environmental laws and regulations;

• our ability to maintain and improve our information technology systems;

• events that give rise to actual or potential food contamination, drug contamination or food-borne illness or any adverse publicity relating to these types of concerns, whether or not valid;

• threats or potential threats to security;

• our ability to retain key personnel;

• risks of data security breaches or losses of confidential customer information;

• risks relating to our substantial indebtedness;

• claims or legal proceedings against us; and

• other factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 27, 2014 and elsewhere in this 10-Q.

We caution that investors should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

BASIS OF PRESENTATION

We operate on a 52/53 week fiscal year ending on the Saturday closest to December 30. Our fiscal years include 13 four-week reporting periods, with an additional week in the thirteenth reporting period for 53-week fiscal years. Our first quarter of each fiscal year includes four reporting periods, while the remaining quarters include three reporting periods.

Our condensed consolidated financial statements for the 16-week periods ended April 18, 2015 and April 19, 2014 are unaudited, and, in the opinion of management, contain all adjustments that are of a normal and recurring nature necessary for a fair statement of financial position and results of operations for such periods.

RECENT EVENTS AFFECTING OUR RESULTS OF OPERATIONS AND THE COMPARABILITY OF REPORTED RESULTS OF OPERATIONS

2015 Sale of Pharmacy Assets

During January 2015, we sold pharmacy scripts and inventory related to 27 of our in-store pharmacy locations, which resulted in a gain on sale of assets of $11.0 million in the condensed consolidated statement of comprehensive loss for the 16-week period ended April 18, 2015.

2014 Dividends

On March 31, 2014 and June 30, 2014, we paid dividends of $2.4 million and $2.3 million, respectively, to Tops MBO Co to fund the quarterly principal and interest payments under the MBO Co Loan. On September 25, 2014, we paid a dividend of $7.9 million to Tops MBO Co to fund the repayment of the remaining principal balance and accrued and unpaid interest on the MBO Co Loan.

- 21 -

Management Purchase

As part of the Management Purchase, we incurred $15.8 million of transaction costs, of which $0.6 million was paid as of December 28, 2013, with $15.0 million paid during the 16-week period ended April 19, 2014 and $0.2 million paid during the 12-week period ended July 12, 2014.

RESULTS OF OPERATIONS

16-Week Period Ended April 18, 2015 Compared with the 16-Week Period Ended April 19, 2014

Summary

The results of operations during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 were impacted by the January 2015 sales of inventory and pharmacy scripts related to 27 in-store pharmacies, and closure of these pharmacies, and the shift in the timing of the Easter holiday. The week following Easter is historically a poor sales week. This week fell during the 16-week period ended April 18, 2015, but did not fall during the comparable period in 2014. Despite a 32.9% decrease in the average retail price of fuel, related profitability improved. Our results for the 16-week period ended April 18, 2015 also reflect increased labor costs, offset by a decline in utility commodity rates. The pharmacy inventory and script sales resulted in an $11.0 million gain, partially offset by $1.0 million of non-recurring severance costs associated with the pharmacy closures.

Net Sales

The following table includes the components of our net sales for the 16-week periods ended April 18, 2015 and April 19, 2014.

(Dollars in thousands)

	16-week periods ended
	April 18, 2015		April 19, 2014		$ Change			% Change
Inside sales	$	676,696	$	688,456	$	(11,760	)		(1.7	)%
Gasoline sales		46,154		68,083		(21,929	)		(32.2	)%
Net sales	$	722,850	$	756,539	$	(33,689	)		(4.5	)%

Inside sales decreased $11.8 million, or 1.7%, during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 due to the $8.4 million reduction in pharmacy sales attributable to the closure of 27 in-store pharmacies during January 2015 and the shift in the timing of the Easter holiday, partially offset by the $6.0 million incremental contribution of two acquired supermarkets and one new supermarket opened since July 2014.

Overall, same store sales decreased by 1.4%. Sales related to the 27 closed in-store pharmacies have been excluded from both of the 16-week periods ended April 18, 2015 and April 19, 2014 for purposes of calculating same store sales. The week following Easter, historically a poor sales week, occurred during the 2015 period, versus the week subsequent to the end of the 2014 period, resulting in an estimated $5.8 million, or 85 basis points negative impact, on same store sales. Additionally, temporary disruptions from the pharmacy closures, and repurposing of the vacated space, had an estimated 36 basis points negative impact on same store sales. The remaining 16 basis points decline in same store sales was largely attributable to a decline in federal funding for the Supplemental Nutrition Assistance Program (“SNAP”), which had an estimated negative impact of 40 basis points on same store sales.

Same store sales is the change in period-over-period inside sales, excluding franchise revenue, for “same stores,” which are supermarkets that have been operating for at least 13 full four-week periods.

Fuel sales decreased during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 due to a 32.9% decrease in the average retail price per gallon, net of applicable discounts, slightly offset by a 1.0% increase in gallons sold due to the addition of four new fuel stations since February 2014.

- 22 -

Gross Profit

The following table includes a comparison of cost of goods sold, distribution costs and gross profit for the 16-week periods ended April 18, 2015 and April 19, 2014.

(Dollars in thousands)

	16-week period ended April 18, 2015			% of Net Sales			16-week period ended April 19, 2014			% of Net Sales			$ Change		% Change
Cost of goods sold	$	(494,125	)		68.4	%	$	(526,635	)		69.6	%	$	32,510		6.2	%
Distribution costs		(14,260	)		2.0	%		(15,767	)		2.1	%		1,507		9.6	%
Gross profit	$	214,465			29.7	%	$	214,137			28.3	%	$	328		0.2	%

As a percentage of net sales, cost of goods sold decreased during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 due to the improvement in profitability on fuel sales, and a decrease in LIFO inventory valuation expense from $1.3 million during the 16-week period ended April 19, 2014 to $0.2 million during the 16-week period ended April 18, 2015. Excluding the impact of non-cash LIFO expense, cost of goods sold as a percentage of inside sales was 67.2% and 67.0% during the 16-week periods ended April 18, 2015 and April 19, 2014, respectively.

As a percentage of net sales, distribution costs remained relatively consistent during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014.

Operating Expenses

The following table includes a comparison of operating expenses for the 16-week periods ended April 18, 2015 and April 19, 2014.

(Dollars in thousands)

	16-week period ended April 18, 2015			% of Net Sales			16-week period ended April 19, 2014		% of Net Sales			$ Change			% Change
Wages, salaries and benefits	$	109,456			15.1	%	$	106,958		14.1	%	$	2,498			2.3	%
Selling and general expenses		37,802			5.2	%		41,452		5.5	%		(3,650	)		(8.8	)%
Administrative expenses		23,493			3.3	%		20,076		2.7	%		3,417			17.0	%
Rent expense		8,197			1.1	%		8,218		1.1	%		(21	)		(0.3	)%
Depreciation and amortization		18,606			2.6	%		17,779		2.4	%		827			4.7	%
Advertising		5,835			0.8	%		6,339		0.8	%		(504	)		(8.0	)%
Gain on sale of assets		(11,014	)		(1.5	)%		—		N/A			(11,014	)		N/A
Total	$	192,375			26.6	%	$	200,822		26.6	%	$	(8,447	)		(4.2	)%

Wages, Salaries and Benefits

The increase in wages, salaries and benefits as a percentage of net sales during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 reflects a $0.75 hourly minimum wage increase in New York State effective January 1, 2015, $1.0 million of severance costs associated with the January 2015 closure of an in-store pharmacies, a $0.5 million increase in pension contributions as prescribed by our collective bargaining agreements, and a $0.5 million increase in medical costs associated with non-union supermarket associates.

Selling and General Expenses

The decrease in selling and general expenses as a percentage of net sales during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 is largely the result of a $5.2 million decrease in utility costs attributable to lower electricity commodity costs.

- 23 -

Administrative Expenses

Administrative expenses increased $3.4 million during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 due to a $1.5 million increase in bonus expense reflecting improved performance against budget metrics, normal wage adjustments and increased associate healthcare costs.

Rent Expense, Net

Rent expense reflects our rental expense for our supermarkets under operating leases, net of income we receive from various entities that rent space in our supermarkets under subleases. Rent expense remained relatively consistent during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014.

Depreciation and Amortization

Depreciation and amortization remained relatively consistent during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014.

Advertising

Advertising remained relatively consistent during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014.

Gain on Sale of Assets

During January 2015, we sold pharmacy scripts and inventory related to 27 of our in-store pharmacy locations for cash proceeds of $14.9 million. These pharmacies were then closed. A resulting gain on sale of assets of $11.0 million, net of the carrying value of sold inventory of $3.2 million and direct selling expenses of $0.7 million, was recognized in the condensed consolidated statement of comprehensive loss for the 16-week period ended April 18, 2015.

Interest Expense, Net

Interest expense remained relatively consistent during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014.

Income Tax (Expense) Benefit

Based on an assessment of positive and negative evidence regarding the realization of our deferred tax assets, we continue to maintain a full valuation allowance against total net deferred tax assets, and consequently, we recognized no income tax benefit during the 16-week period ended April 18, 2015. The income tax expense recognized for the 16-week period ended April 18, 2015 primarily reflects the recognition of additional valuation allowance associated with the tax amortization of our indefinite-lived tradename and goodwill deferred tax liabilities. The effective tax rate would have been 38.7% without the establishment of the valuation allowance.

We recognized income tax benefit during the 16-week period ended April 19, 2014 as a result of the Management Purchase yielding larger intangible asset values, which drove us into a net deferred tax liability position (excluding our indefinite-lived tradename and goodwill deferred tax liabilities). The income tax benefit recognized for the 16-week period ended April 19, 2014 primarily reflects the loss before income taxes, net of the establishment of valuation allowance against deferred tax assets, primarily reflecting the recognition of valuation allowance associated with the tax amortization of our indefinite-lived tradename and goodwill deferred tax liabilities. The overall effective tax rate was 35.2%. The effective tax rate would have been 42.0% without the impact of the valuation allowance establishment.

Net Loss

Our net loss decreased $3.4 million during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 for the reasons described above.

- 24 -

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of cash are cash flows generated from our operations and borrowings under our 2017 ABL Facility. Our 2017 ABL Facility allows a maximum borrowing capacity of $125.0 million, subject to a borrowing base calculation, with an option for future upsizing with up to $50.0 million of incremental commitments if certain conditions are met. As of April 18, 2015, the unused availability under our 2017 ABL Facility was $46.9 million, after giving effect to the borrowing base calculation, $23.9 million of letters of credit outstanding and $30.0 million of borrowings outstanding. We expect that cash generated from operations and borrowing capacity under our 2017 ABL Facility will permit us to fund our debt service requirements, investments in working capital, capital expenditures, acquisitions and other cash requirements for at least the next twelve months. We do not expect to make dividends of significant size in the near future; however, we may pay dividends to our stockholders from time to time. Our financial flexibility will depend upon our future operating performance, which will be affected by prevailing economic conditions in the grocery industry and financial, business, and other factors, some of which are beyond our control. Although unforeseen, if faced with the need to increase liquidity, we could readily respond through the control of variable operating expenses (for example, by adjusting employment levels) and through the scale back of planned capital expenditure and acquisition activities.

During January 2015, we sold pharmacy scripts and inventory related to 27 of its in-store pharmacies for cash proceeds of $14.9 million. These pharmacies were then closed.

On December 1, 2013, the Management Purchase was consummated. Of the total cash consideration of $20.9 million, $4.3 million was funded through the use of available Company cash. Additionally, we incurred $15.8 million of transaction costs, of which $0.6 million were paid as of December 28, 2013, with $15.0 million paid during the 16-week period ended April 19, 2014 and $0.2 million paid during the 12-week period ended July 12, 2014.

On June 15, 2015, semi-annual cash interest payments totaling $27.0 million are payable related to our Holding I Notes and Holding II Notes. We expect these payments will be funded through cash from operations and borrowings under our 2017 ABL Facility. No principal amounts are payable related to these notes until their respective maturities on December 15, 2017 and June 15, 2018.

Cash Flows Information

The following is a summary of cash provided by or used in each of the indicated types of activities:

(Dollars in thousands)

	16-week periods ended
	April 18, 2015			April 19, 2014
Cash provided by (used in):
Operating activities	$	30,613		$	7,877
Investing activities		1,321			(12,300	)
Financing activities		(26,432	)		2,108

Cash provided by operating activities increased $22.7 million during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 reflecting $15.0 million of transaction fees related to the Management Purchase that were paid during the 16-week period ended April 19, 2014, $2.9 million of cash proceeds from the January 2015 sales of inventory related to 27 in-store pharmacies, and an improvement in working capital requirements during the 2015 period.

Cash provided by (used in) investing activities improved $13.6 million during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014 primarily due to net cash proceeds of $11.3 million from the sales of pharmacy scripts during January 2015. We expect to invest $30 million to $40 million in capital expenditures during Fiscal 2015, primarily related to new supermarket locations, remodels and maintenance activities. We expect to fund these capital expenditures primarily with cash from operations.

Cash (used in) provided by financing activities decreased $28.5 million during the 16-week period ended April 18, 2015 compared with the 16-week period ended April 19, 2014. The decrease reflects a $19.3 million increase in 2017 ABL Facility net repayments from $2.7 million during the 16-week period ended April 19, 2014 to $22.0 million during the 16-week period ended April 18, 2015. The 16-week period ended April 19, 2014 also includes $12.8 million of cash proceeds from the sale of three supermarket locations as part of sale-leaseback financing transactions.

- 25 -

Multiemployer Pension Plans

We contribute to the Local One plan, a defined benefit multiemployer pension plan, under our collective bargaining agreements with Local One. The Local One plan generally provides retirement benefits to participants based on their service to contributing employers. We are contingently liable for withdrawal liability in the event that we withdraw from the Local One plan. The actuary for the Local One plan has estimated that, as of December 31, 2013, our withdrawal liability would have been approximately $334.3 million in the event of our complete withdrawal from the Local One plan during 2014. We have not yet received an estimate for a complete withdrawal occurring in 2015. In accordance with applicable accounting rules, our contingent withdrawal liability is not included in our consolidated financial statements. We have no intention to withdraw from the Local One plan. During the 16-week periods ended April 18, 2015 and April 19, 2014, we made contributions of $3.8 million and $3.3 million, respectively, to this plan. We are required to increase our annual contributions to the Local One plan pursuant to our current collective bargaining agreements and the Local One plan’s current rehabilitation plan.

As a result of our acquisition of Erie Logistics from C&S in December 2013, we are obligated to contribute to the New York State Teamsters Conference Pension and Retirement Fund. During the 16-week periods ended April 18, 2015 and April 19, 2014, our required contributions to the Fund were $1.6 million and $1.4 million, respectively.

We are contingently liable for withdrawal liability in the event of a withdrawal from the Fund, which includes any withdrawal liability imposed on Erie Logistics for which C&S is liable. In late January 2014, we received notice that the Fund had suspended Erie Logistics as a participating employer in the Fund pending the Fund’s investigation into the acquisition.

Notwithstanding the suspension, we continued to tender contributions to the Fund for the Erie Logistics associates as required by the collective bargaining agreements with Teamsters Local 264. The Fund has rejected and returned these contributions to date. We have established a separate interest bearing account to hold these contributions.

On May 27, 2014, the Fund provided notice to Erie Logistics and C&S of its determination that Erie Logistics’ incurred employer withdrawal liability as a result of the acquisition. The notice provides that Erie Logistics owes withdrawal liability of $183.7 million, payable in a lump sum or in monthly installments, calculated to give effect to a limit on total withdrawal liability imposed by ERISA, of $641,514 for 240 months. If it were ultimately determined that Erie Logistics incurred a withdrawal liability to the Fund, the Company would bear financial responsibility for this liability. Under the terms of the purchase agreement for the acquisition of Erie Logistics from C&S, and as a continuation of our prior contractual obligations, the Company retains the obligation to indemnify C&S in the event withdrawal liability is imposed on Erie Logistics, the Company or C&S. Although we are vigorously contesting the withdrawal determination, during the pendency of the proceeding to contest such determination, ERISA requires that conditional monthly payments of withdrawal liability be made, which began July 28, 2014. These monthly conditional payments of withdrawal liability, totaling $1.9 million during the 16-week period ended April 18, 2015, are in addition to pension contributions the Company has tendered which the Fund has rejected and returned, as discussed in Note 10 to our condensed consolidated financial statements included in Item 1 of this 10-Q.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements at April 18, 2015 consisted of operating leases and any potential withdrawal liability obligations under our multi-employer pension plans. We are not a party to any other off-balance sheet arrangements, that have, or are reasonably likely to have, a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources.

Inflation

Product cost inflation could vary from our estimates due to general economic conditions, weather, availability of raw materials and ingredients in the products that we sell and their packaging, and other factors beyond our control.

- 26 -

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods.

Refer to Holding II’s audited consolidated financial statements as of December 27, 2014 for a description of certain critical accounting policies, including those related to vendor allowances, inventory valuation, valuation of tradename, valuation of long-lived assets, acquisition accounting, leases, self-insurance programs and income taxes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We use derivative financial instruments from time to time, primarily to manage our exposure to fluctuations in interest rates and, to a lesser extent, adverse fluctuations in commodity prices and other market risks. We do not enter into derivative financial instruments for trading purposes. As a matter of policy, all of our derivative positions are intended to reduce risk by hedging an underlying economic exposure. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments generally are offset by reciprocal changes in the value of the underlying exposure.

We manage our exposure to interest rates and changes in the fair value of our debt instruments primarily through the strategic use of variable and fixed rate debt, and interest rate swaps. As of April 18, 2015, we did not have any outstanding interest rate swaps.

The table below provides information about our outstanding debt as of April 18, 2015. The amounts shown for each year represent the contractual maturities of long-term debt, excluding capital lease obligations. Interest rates reflect the weighted average rates for the outstanding instruments. The Fair Value column includes the fair value of our debt instruments as of April 18, 2015. Refer to Note 1 of our condensed consolidated financial statements in Item 1 of this 10-Q for information about our accounting policy for financial instruments.

(Dollars in thousands)

	Remainder of 2015			2016			2017			2018			2019			Thereafter			Fair Value
Debt
Fixed rate	$	1,336		$	2,076		$	460,681		$	150,036		$	37		$	400		$	637,966
Average interest rate		4.8	%		4.6	%		8.9	%		8.7	%		4.0	%		4.0	%
Variable rate	$	—		$	—		$	30,000		$	—		$	—		$	—		$	30,000
Average interest rate		N/A			N/A			2.02	%		N/A			N/A			N/A

COMMODITY PRICE RISK

We purchase products that are impacted by commodity prices and are therefore subject to price volatility caused by weather, market conditions and other factors, which are not considered predictable or within our control.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of April 18, 2015, the Chief Executive Officer and the Chief Financial Officer, together with certain designated members of the finance and accounting organization, evaluated the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures were effective as of April 18, 2015.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company’s internal control over financial reporting during the 16-week period ended April 18, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 27 -

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The disclosure contained under the heading “Multiemployer Pension Plan” in Note 10 to the condensed consolidated financial statements contained in Item 1 of this 10-Q is hereby incorporated by reference.

The Company is subject to various claims and legal proceedings which arise in the ordinary course of business. While the outcome of these claims and proceedings cannot be predicted with certainty, management does not believe that the outcome of any of these claims and proceedings will have a material effect on our results of operations, financial position or cash flows.

ITEM 1A. RISK FACTORS

There are no material changes from risk factors for the Company disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2014.

ITEM 6. EXHIBITS

Exhibit No.
4.1	Fifth Supplemental Indenture, dated as of April 30, 2015, to the Indenture, dated as of December 20, 2012 among Tops Holding LLC, Tops Markets II Corporation, Tops Holding II Corporation, the guarantors named therein, and U.S. Bank National Association, as trustee and collateral agent.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

- 28 -

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TOPS HOLDING II CORPORATION
By:	/s/ David Langless
	David Langless
	Senior Vice President and Chief Financial Officer
	May 20, 2015

- 29 -

EX-4.1

Exhibit 4.1

Executed Version

FIFTH SUPPLEMENTAL INDENTURE

Dated as of April 30, 2015

to

INDENTURE

Dated as of December 20, 2012 among

TOPS HOLDING LLC,

TOPS MARKETS, LLC and

TOPS MARKETS II CORPORATION,

and the Guarantors from time to time, as Guarantors, and

U.S. BANK NATIONAL ASSOCIATION, as Trustee and

U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent and

ERIE LOGISTICS LLC

8.875% SENIOR SECURED NOTES DUE 2017

This FIFTH SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of April [30], 2015, by and among Erie Logistics LLC, a Delaware limited liability company (“Erie Logistics”), a subsidiary of Tops Holding LLC, a Delaware limited liability company (the “Tops Holding”), Tops Markets, LLC, a New York limited liability company (“Tops Markets”) and Tops Markets II Corporation, a Delaware corporation (“Tops Markets II” and together with Tops Holding and Tops Markets, the “Issuers”), Tops PT, LLC, a New York limited liability company (“Tops PT”), Tops Gift Card Company, LLC, a Virginia limited liability company (“Tops Gift”), Tops Holding II Corporation, a Delaware corporation (“Tops Holding II” and together with Tops PT and Tops Gift, the “Guarantors”), U.S. Bank National Association, a national banking association organized and existing under the bank of the United States of America, as trustee (the “Trustee”) and U.S. Bank National Association, a national banking association organized and existing under the bank of the United States of America, as Collateral Agent (the “Collateral Agent”).

W I T N E S S E T H

WHEREAS, the Issuers, the Guarantors, the Trustee and the Collateral Agent have heretofore executed and delivered to the Trustee an indenture, dated as of December 20, 2012, a First Supplemental Indenture thereto, dated as of May 15, 2013, a Second Supplemental Indenture thereto, dated as of August 20, 2013, a Third Supplemental Indenture thereto, dated as of November 20, 2013 and a Fourth Supplemental Indenture thereto, dated as of November 20, 2013 (as amended and supplemented from time to time, the “Indenture”), providing for the issuance of the Issuers’ 8.875% Senior Secured Notes due 2017 (the “Notes”);

WHEREAS, each of the Issuers desires that Erie Logistics become a guarantor of the Notes;

WHEREAS, the Indenture provides that under certain conditions Erie Logistics shall execute and deliver to the Trustee a supplemental indenture pursuant to which Erie Logistics shall unconditionally guarantee all of the Issuers’ Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

WHEREAS, the Issuers, the Guarantors and Erie Logistics have requested that the Trustee and the Collateral Agent execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

(2) Agreement to be Bound. Erie Logistics hereby becomes a party to the Indenture as a Guarantor and as such will have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture.

(3) Guarantee. Erie Logistics agrees, on a joint and several basis with all the existing Guarantors, to Guarantee to each Holder of the Notes and the Trustee the Indenture Obligations pursuant to Article 13 of the Indenture.

(4) No Recourse Against Others. No director, officer, employee, incorporator or stockholder of Erie Logistics shall have any liability for any obligations of the Issuers or the Guarantors (including Erie Logistics) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Guarantees.

(5) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(6) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

(7) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

(8) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by Erie Logistics.

(9) Benefits Acknowledged. Erie Logistics’ Guarantee is subject to the terms and conditions set forth in the Indenture. Erie Logistics acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.

(10) Successors. All agreements of Erie Logistics in this Supplemental Indenture shall bind its successors, except as otherwise provided in the Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

ERIE LOGISTICS LLC, as Guarantor
By:	/s/Frank Curci
	Name:	Frank Curci
	Title:	President & CEO
TOPS HOLDING LLC, as Issuer
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO
TOPS MARKETS, LLC, as Issuer
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO
TOPS MARKETS II CORPORATION, as Issuer
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO
TOPS GIFT CARD COMPANY, LLC, as Guarantor
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO
TOPS PT, LLC, as Guarantor
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO

[Signature Page to the Fifth Supplemental Indenture]

TOPS HOLDING II CORPORATION, as Guarantor
By:	/s/ Frank Curci
	Name:	Frank Curci
	Title:	President & CEO

[Signature Page to the Fifth Supplemental Indenture]

U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:	/s/ Beverly A. Freeney
	Name:	Beverly A. Freeney
	Title:	Vice President
U.S. BANK NATIONAL ASSOCIATION, as Collateral Agent
By:	/s/ Beverly A. Freeney
	Name:	Beverly A. Freeney
	Title:	Vice President

[Signature Page to the Fifth Supplemental Indenture]

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Frank Curci, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tops Holding II Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 20, 2015

/s/ Frank Curci

Frank Curci

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David Langless, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tops Holding II Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 20, 2015

/s/ David Langless

David Langless

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q of Tops Holding II Corporation (the “Company”) for the 16-week period ended April 18, 2015 (the “Report”) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

I, Frank Curci, Chief Executive Officer of the Company, certify, to the best of my knowledge, that on the date hereof:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Frank Curci

Frank Curci

Chief Executive Officer

May 20, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q of Tops Holding II Corporation (the “Company”) for the 16-week period ended April 18, 2015 (the “Report”) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

I, David Langless, Chief Financial Officer of the Company, certify, to the best of my knowledge, that on the date hereof:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David Langless

David Langless

Chief Financial Officer

May 20, 2015

XML

Income Taxes - Summary of Income Tax (Expense) Benefit (Detail) (USD $) In Thousands, unless otherwise specified	4 Months Ended
	Apr. 18, 2015	Apr. 19, 2014
Income Tax Disclosure [Abstract]
Current	$ (2)	$ (17)
Deferred	(540)	4,153
Total income tax (expense) benefit	$ (542)	$ 4,136

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies (Tables)

4 Months Ended

Apr. 18, 2015

Accounting Policies [Abstract]

Sales Revenue by Type of Similar Product

The following table presents sales revenue by type of similar product (dollars in thousands):

	16-week periods ended
	April 18, 2015					April 19, 2014
	Amount		% of Total			Amount		% of Total
Non-perishables(1)	$	412,980		57.1	%	$	424,428		56.1	%
Perishables(2)		211,755		29.3	%		207,151		27.4	%
Fuel		46,154		6.4	%		68,083		9.0	%
Pharmacy		45,235		6.3	%		50,109		6.6	%
Other(3)		6,726		0.9	%		6,768		0.9	%
	$	722,850		100.0	%	$	756,539		100.0	%

(1) Non-perishables consist of grocery, dairy, frozen, general merchandise, health and beauty care and other non-perishable related products.

(2) Perishables consist of produce, meat, seafood, bakery, deli, floral, prepared foods and other perishable related products.

(3) Other primarily consists of franchise income and service commission income, such as lottery, money orders and money transfers.

Fair Value of Financial Instruments

At April 18, 2015 and December 27, 2014, the carrying value and the estimated fair value of the Company’s debt instruments were as follows (dollars in thousands):

	April 18, 2015		December 27, 2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,010	$	1,983
Long-term debt		641,539		664,130
Total carrying value of long-term debt (Note 6)		643,549		666,113
Fair value of long-term debt		667,966		671,338
Excess of fair value over carrying value	$	24,417	$	5,225

XML

Shareholders' Deficit

4 Months Ended

Apr. 18, 2015

Equity [Abstract]

Shareholders' Deficit

9. SHAREHOLDERS’ DEFICIT

On January 8, 2015, the Company paid a dividend of $0.8 million to Tops MBO Co to repurchase outstanding common stock shares of Tops MBO Co from a former Company executive. In addition, one outstanding common stock share of Holding II was repurchased.

XML

Income Taxes

4 Months Ended

Apr. 18, 2015

Income Tax Disclosure [Abstract]

Income Taxes

7. INCOME TAXES

Income tax (expense) benefit was as follows (dollars in thousands):

	16-week periods ended
	April 18, 2015			April 19, 2014
Current	$	(2	)	$	(17	)
Deferred		(540	)		4,153
Total income tax (expense) benefit	$	(542	)	$	4,136

Based on an assessment of positive and negative evidence regarding the realization of the Company’s deferred tax assets, the Company continues to maintain a full valuation allowance against total net deferred tax assets, and consequently, the Company recognized no income tax benefit during the 16-week period ended April 18, 2015. The income tax expense recognized for the 16-week period ended April 18, 2015 primarily reflects the recognition of additional valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities. The effective tax rate would have been 38.7% without the establishment of the valuation allowance.

The Company recognized income tax benefit during the 16-week period ended April 19, 2014 as a result of the Management Purchase yielding larger intangible asset values, which drove the Company into a net deferred tax liability position (excluding the Company’s indefinite-lived tradename and goodwill deferred tax liabilities). The income tax benefit recognized for the 16-week period ended April 19, 2014 primarily reflects the loss before income taxes, net of the establishment of valuation allowance against deferred tax assets, primarily reflecting the recognition of valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities. The overall effective tax rate was 35.2%. The effective tax rate would have been 42.0% without the impact of the valuation allowance establishment.

As of the beginning of fiscal year 2015, the Company had U.S. federal and state net operating loss carryforwards of $45.7 million and $41.9 million, respectively, which expire beginning in 2026. In addition, the Company had federal tax credits of $4.6 million, which expire beginning in 2026.

XML

Gain on Sale of Assets

4 Months Ended

Apr. 18, 2015

Discontinued Operations and Disposal Groups [Abstract]

Gain on Sale of Assets

8. GAIN ON SALE OF ASSETS

During January 2015, the Company sold pharmacy scripts and inventory related to 27 of its in-store pharmacy locations for cash proceeds of $14.9 million. These pharmacies were then closed. A resulting gain on sale of assets of $11.0 million, net of the carrying value of sold inventory of $3.2 million and direct selling expenses of $0.7 million, was recognized in the condensed consolidated statement of comprehensive loss for the 16-week period ended April 18, 2015.

XML

Commitments and Contingencies

4 Months Ended

Apr. 18, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. COMMITMENTS AND CONTINGENCIES

Multiemployer Pension Plan

On December 22, 2013, Tops Markets acquired all of the membership interests of Erie Logistics, LLC (“Erie Logistics”) and certain other assets from C&S Wholesale Grocers, Inc. (“C&S”). Erie Logistics operates the Company’s warehouse and distribution facilities located in Lancaster and Cheektowaga, New York and employs the warehouse and driver personnel at these facilities, all of whom are represented by Teamsters Local 264. Under its supply agreement with Tops Markets, C&S, through Erie Logistics, had operated these facilities since 2002.

In late January 2014, the Company received notice that the New York State Teamsters Conference Pension and Retirement Fund (the “Fund”) had suspended Erie Logistics as a participating employer in the Fund pending the Fund’s investigation into the acquisition of Erie Logistics from C&S. This suspension was retroactive to the effective date of the acquisition. During this “suspension” and thereafter through the date of this Quarterly Report on form 10-Q, Erie Logistics has continued to make contributions to the Fund as required by the collective bargaining agreements with Teamsters Local 264. The Fund has rejected and returned these contributions. During the 16-week periods ended April 18, 2015 and April 19, 2014, these rejected contributions totaled $1.6 million and $1.4 million, respectively. On May 27, 2014, the Fund provided Erie Logistics and C&S with notice of its determination that Erie Logistics incurred employer withdrawal liability as a result of the acquisition. The notice provides that Erie Logistics owes withdrawal liability of $183.7 million, payable in a lump sum or in monthly installments, calculated to give effect to a limit on total withdrawal liability imposed by the Employee Retirement Income Security Act (“ERISA”), of $641,514 for 240 months.

The Company believes that the Fund’s determination of a withdrawal violates ERISA, the existing participation agreements between Erie Logistics and the Fund, and the fiduciary duties of the trustees of the Fund. The Company is vigorously contesting this determination, initially through mandatory arbitration under ERISA.

The Company has not recorded any reserve for this matter as a loss is not considered probable. If it were ultimately determined that Erie Logistics has incurred a withdrawal liability to the Fund, the Company would bear financial responsibility for this liability. Under the terms of the purchase agreement for the acquisition of Erie Logistics from C&S, and as a continuation of our prior contractual obligations, the Company retains the obligation to indemnify C&S in the event withdrawal liability is imposed on Erie Logistics, the Company or C&S. During the pendency of the proceeding to contest the withdrawal determination, ERISA requires that conditional monthly payments of withdrawal liability be made, which began July 28, 2014. The monthly conditional payments of withdrawal liability, totaling $1.9 million during the 16-week period ended April 18, 2015, are in addition to pension contributions the Company is required to make for the benefit of Erie Logistics’ associates under the collective bargaining agreements with Teamsters Local 264 which, as noted, the Fund has refused to accept. The aggregate conditional monthly payments of withdrawal liability, totaling $ 5.8 million as of April 18, 2015, have been recorded in accounts receivable, while the aggregate rejected contributions, totaling $ 5.8 million as of April 18, 2015, have been recorded in accrued expenses and other current liabilities within our condensed consolidated balance sheet.

On July 28, 2014, Teamsters Local 264 filed a grievance charging a violation of its collective bargaining agreements by reason of the Company’s failing to participate in the Fund.

Purchase Commitments

Effective December 22, 2013, in connection with its purchase of all the membership interests of Erie Logistics and certain other assets from C&S, the Company modified its existing supply agreement with C&S whereby it will resume warehousing and transportation functions, while C&S will continue to provide procurement and purchasing services in support of the majority of the Company’s supply chain. This modified supply agreement sets out the parties’ respective responsibilities for the procurement and purchase of merchandise intended for use or resale in our supermarkets. In consideration for the services it provides under the agreement, C&S is paid a fee based on all merchandise procured and also has incentive income opportunities. Effective April 1, 2015, the Company and C&S agreed in principal to amend certain operating terms of the supply agreement and extend the term of the agreement through April 1, 2020. A supply agreement amendment reflecting these terms is expected to be formalized and executed during the Company’s second fiscal quarter.

On September 24, 2012, the Company entered into a supplemental supply agreement with C&S to provide similar services in support of the 21 supermarkets acquired from GU Markets in October 2012. This agreement expires on September 23, 2022.

Effective May 1, 2013, Tops Markets entered into a member participation agreement with Topco, a procurement cooperative for food retailers and wholesalers, for the supply of substantially all of the Company’s prescription drugs. Tops Markets must purchase 95% of its branded prescription drugs and 95% of its generic pharmaceutical products through Topco. This agreement expires February 28, 2017.

Effective July 24, 2010, the Company extended its existing IT outsourcing agreement with HP Enterprise Services, LLC (formerly known as Electronic Data Systems, LLC), or HP, through December 31, 2017 to provide a wide range of information systems services. Under the agreement, HP provides data center operations, mainframe processing, business applications and systems development to enhance the Company’s customer service and efficiency. The charges under this agreement are based upon the services requested at predetermined rates.

The costs of these purchase commitments are not reflected in the Company’s consolidated balance sheets.

Environmental Liabilities

The Company is contingently liable for potential environmental issues of some of its properties. As the Company is unaware of environmental issues that are expected to materially impact the Company’s condensed consolidated financial statements as a whole, no amounts were accrued as of April 18, 2015 or December 27, 2014.

Collective Bargaining Agreements

The Company employs approximately 15,000 associates. Approximately 83% of these associates are members of United Food and Commercial Workers, or UFCW, District Union Local One, or Local One, or two other UFCW unions. Approximately 4% are members of Teamsters Local 264, working within our warehouse and distribution facilities. All other associates are non-union. The Company is a party to five collective bargaining agreements with Local One expiring between October 2015 and July 2017. The Company has two non-Local One UFCW collective bargaining agreements that expire in April 2016 and February 2018. The Company is also a party to three collective bargaining agreements with Teamsters Local 264 expiring in August 2019.

Legal Proceedings

Except as otherwise disclosed in this note, the Company is unaware of legal proceedings that are expected to materially impact the Company’s consolidated financial statements as a whole. No amounts related to legal proceedings were accrued as of April 18, 2015 or December 27, 2014.

XML

Accrued Expenses and Other Current Liabilities - Summary of Accrued Expenses and Other Current Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Apr. 18, 2015	Dec. 27, 2014
Other Liabilities Disclosure [Abstract]
Wages, taxes and benefits	$ 19,148	$ 18,951
Interest payable	18,676	2,269
Lottery	12,803	10,954
Union medical, pension and 401(k)	9,194	8,985
Self-insurance reserves	6,130	6,130
Property and equipment expenditures	4,350	3,383
Gift cards	3,554	8,974
Professional and legal fees	3,332	3,170
Utilities	3,085	3,383
Sales and use tax	3,013	596
Repairs and maintenance	1,848	2,212
Money orders	864	887
Other	10,925	12,216
Accrued expenses and other current liabilities, Total	$ 96,922	$ 82,110

XML

Accrued Expenses and Other Current Liabilities (Tables)

4 Months Ended

Apr. 18, 2015

Text Block [Abstract]

Summary of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (dollars in thousands):

	April 18, 2015		December 27, 2014
Wages, taxes and benefits	$	19,148	$	18,951
Interest payable		18,676		2,269
Lottery		12,803		10,954
Union medical, pension and 401(k)		9,194		8,985
Self-insurance reserves		6,130		6,130
Property and equipment expenditures		4,350		3,383
Gift cards		3,554		8,974
Professional and legal fees		3,332		3,170
Utilities		3,085		3,383
Sales and use tax		3,013		596
Repairs and maintenance		1,848		2,212
Money orders		864		887
Other		10,925		12,216
	$	96,922	$	82,110

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail)	4 Months Ended
	Apr. 18, 2015 Store	Apr. 19, 2014 Store
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of reportable segment	1
Fuel [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Services offered by supermarkets	51	48
Pharmacy [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Services offered by supermarkets	49	76
Supermarkets [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	158
Additional operated supermarkets by franchisees	5
Supermarkets [Member] | Tops Markets, LLC [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	157
Supermarkets [Member] | Orchard Fresh [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	1

XML

Gain on Sale of Assets - Additional Information (Detail) (USD $)	1 Months Ended	4 Months Ended
	Jan. 31, 2015 Location	Apr. 18, 2015
Discontinued Operations and Disposal Groups [Abstract]
Number of locations pharmacy scripts and inventory sold	27
Proceeds from sale of assets	$ 14,900,000
Gain on sale of assets		11,014,000
Carrying value of sold inventory		3,200,000
Direct selling expenses on sale of assets		$ 700,000

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	4 Months Ended
	Apr. 18, 2015	Apr. 19, 2014
Income Statement [Abstract]
Share-based compensation expense included in administrative expenses	$ 69	$ 10

XML

Accrued Expenses and Other Current Liabilities

4 Months Ended

Apr. 18, 2015

Text Block [Abstract]

Accrued Expenses and Other Current Liabilities

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (dollars in thousands):

	April 18, 2015		December 27, 2014
Wages, taxes and benefits	$	19,148	$	18,951
Interest payable		18,676		2,269
Lottery		12,803		10,954
Union medical, pension and 401(k)		9,194		8,985
Self-insurance reserves		6,130		6,130
Property and equipment expenditures		4,350		3,383
Gift cards		3,554		8,974
Professional and legal fees		3,332		3,170
Utilities		3,085		3,383
Sales and use tax		3,013		596
Repairs and maintenance		1,848		2,212
Money orders		864		887
Other		10,925		12,216
	$	96,922	$	82,110

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies - Summary of Sales Revenue by Type of Product (Detail) (USD $) In Thousands, unless otherwise specified	4 Months Ended
	Apr. 18, 2015		Apr. 19, 2014
Sales Revenue, Goods, Net [Abstract]
Sales revenue	$ 722,850		$ 756,539
Sale revenue percentage	100.00%		100.00%
Non-perishables [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	412,980	[1]	424,428	[1]
Sale revenue percentage	57.10%	[1]	56.10%	[1]
Perishable [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	211,755	[2]	207,151	[2]
Sale revenue percentage	29.30%	[2]	27.40%	[2]
Fuel [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	46,154		68,083
Sale revenue percentage	6.40%		9.00%
Pharmacy [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	45,235		50,109
Sale revenue percentage	6.30%		6.60%
Other Products [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	$ 6,726	[3]	$ 6,768	[3]
Sale revenue percentage	0.90%	[3]	0.90%	[3]

[1] Non-perishables consist of grocery, dairy, frozen, general merchandise, health and beauty care and other non-perishable related products.

[2] Perishables consist of produce, meat, seafood, bakery, deli, floral, prepared foods and other perishable related products.

[3] Other primarily consists of franchise income and service commission income, such as lottery, money orders and money transfers.

XML

Debt - Additional Information (Detail) (USD $)	0 Months Ended			4 Months Ended		12 Months Ended
	Nov. 29, 2013	May 15, 2013	Dec. 20, 2012	Apr. 18, 2015	Apr. 19, 2014	Dec. 27, 2014	Dec. 14, 2012
Debt Instrument [Line Items]
Dividend to shareholders		$ 141,900,000	$ 100,000,000
Dividend per share paid		$ 980
Repayments of long-term debt borrowings				647,000	2,621,000
Debt instrument interest rate description				LIBOR plus a margin of 300 basis points
Loan carrying amount	12,300,000
Interest rate of term loan	3.00%
2017 ABL Facility [Member]
Debt Instrument [Line Items]
Maturity date of senior notes				Dec. 14, 2017
Maximum borrowing capacity in ABL Facility							125,000,000
Unused availability under the ABL Facility				46,900,000
Line of credit facility, amount outstanding				30,000,000		52,000,000
Weighted average interest rate on borrowings under the ABL Facility				2.02%		2.24%
2017 ABL Facility [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Letters of credit outstanding				23,900,000		20,700,000
2017 ABL Facility [Member] | Prime Rate Plus [Member]
Debt Instrument [Line Items]
Debt instrument interest rate description				50 to 100 basis points
2017 ABL Facility [Member] | LIBOR Plus [Member]
Debt Instrument [Line Items]
Debt instrument interest rate description				150 to 200 basis points
Maximum [Member] | 2017 ABL Facility [Member]
Debt Instrument [Line Items]
Increase in capacity upon met specified condition							50,000,000
Holding II [Member]
Debt Instrument [Line Items]
Senior secured notes issued		150,000,000
Interest rate, notes		8.75%
Maturity date of senior notes		Jun. 15, 2018
Proceeds from long-term debt borrowings		148,500,000
Debt original issue discount		1,500,000		1,017,000		1,100,000
Semi-annual interest payments date				The Holding II Notes mature June 15, 2018 and require semi-annual interest payments on June 15 and December 15.
Loan carrying amount				150,000,000		150,000,000
Holding II [Member] | Condition One [Member]
Debt Instrument [Line Items]
Interest rate, notes				9.50%
Holding I [Member]
Debt Instrument [Line Items]
Senior secured notes issued			460,000,000
Interest rate, notes			8.875%
Maturity date of senior notes			Dec. 15, 2017
Semi-annual interest payments date				The Holding I Notes mature December 15, 2017 and require semi-annual interest payments on June 15 and December 15.
Loan carrying amount				460,000,000		460,000,000
Old Senior Secured Notes [Member]
Debt Instrument [Line Items]
Repayments of long-term debt borrowings			$ 350,000,000

XML

Goodwill and Intangible Assets, Net (Tables)

4 Months Ended

Apr. 18, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Goodwill

The following table summarizes the change in the Company’s goodwill balance during the 16-week period ended April 18, 2015 (dollars in thousands):

Balance – December 27, 2014	$	212,901
Adjustments		—
Balance – April 18, 2015	$	212,901

Summary of Intangible Assets, Net of Accumulated Amortization

Intangible assets, net of accumulated amortization, consist of the following (dollars in thousands):

April 18, 2015	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Amortization Period
Tradename – indefinite	$	131,200	$	—		$	131,200		Indefinite life
Customer relationships		29,200		(9,800	)		19,400		14.0
Favorable lease rights		21,600		(4,203	)		17,397		9.0
Franchise agreements		13,300		(2,647	)		10,653		14.0
Pharmacy scripts		2,800		(807	)		1,993		14.0
	$	198,100	$	(17,457	)	$	180,643		11.8

December 27, 2014	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Tradename – indefinite	$	131,200	$	—		$	131,200
Customer relationships		29,200		(7,913	)		21,287
Favorable lease rights		21,600		(3,269	)		18,331
Franchise agreements		13,300		(2,115	)		11,185
Pharmacy scripts		2,800		(644	)		2,156
	$	198,100	$	(13,941	)	$	184,159

Summary of Expected Future Amortization of Intangible Assets

As of April 18, 2015, expected future amortization of intangible assets is as follows (dollars in thousands):

2015 (remaining period)	$	7,882
2016		8,201
2017		6,959
2018		5,920
2019		4,966
Thereafter		15,515