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 OCTOBER 3, 2015

OR

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

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  o

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

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

As of November 9, 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 October 3, 2015 and December 27, 2014	1
	Condensed Consolidated Statements of Comprehensive Loss for the 12-week and 40-week periods ended October 3, 2015 and October 4, 2014	2
	Condensed Consolidated Statements of Cash Flows for the 40-week periods ended October 3, 2015 and October 4, 2014	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24
ITEM 4.	CONTROLS AND PROCEDURES	24
PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	25
ITEM 1A.	RISK FACTORS	25
ITEM 6.	EXHIBITS	25
SIGNATURE		26

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)

	October 3, 2015			December27, 2014
Assets
Current assets:
Cash and cash equivalents	$	36,261		$	26,316
Accounts receivable, net		70,364			64,130
Inventory, net		149,723			149,284
Prepaid expenses and other current assets		13,554			11,172
Income taxes refundable		43			43
Current deferred tax assets		3,456			3,456
Total current assets		273,401			254,401
Property and equipment, net		373,639			385,889
Goodwill (Note 3)		212,901			212,901
Intangible assets, net (Note 3)		175,355			184,159
Total assets	$	1,035,296		$	1,037,350
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable	$	85,225		$	85,985
Accrued expenses and other current liabilities (Note 4)		104,232			82,110
Current portion of capital lease obligations (Note 5)		8,524			8,653
Current portion of long-term debt (Note 6)		2,052			1,983
Total current liabilities		200,033			178,731
Capital lease obligations (Note 5)		140,465			140,315
Long-term debt, net (Note 6)		669,303			649,097
Other long-term liabilities		35,980			33,591
Non-current deferred tax liabilities		46,716			45,383
Total liabilities		1,092,497			1,047,117
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 October 3, 2015 and 126,560 shares issued    and outstanding as of December 27, 2014)		—			—
Treasury stock (at cost; 1 share as of October 3, 2015)		(1	)		—
Paid-in capital		7,856			8,454
Accumulated deficit		(63,384	)		(16,549	)
Accumulated other comprehensive loss, net of tax		(1,672	)		(1,672	)
Total shareholders' deficit		(57,201	)		(9,767	)
Total liabilities and shareholders' deficit	$	1,035,296		$	1,037,350

See notes to condensed consolidated financial statements.

- 1 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Dollars in thousands)

(Unaudited)

	12-week periods ended						40-week periods ended
	October 3, 2015			October 4, 2014			October 3, 2015			October 4, 2014
Net sales	$	560,744		$	580,741		$	1,869,505		$	1,933,480
Cost of goods sold		(386,195	)		(404,739	)		(1,284,579	)		(1,349,355	)
Distribution costs		(9,125	)		(10,969	)		(34,948	)		(37,801	)
Gross profit		165,424			165,033			549,978			546,324
Operating expenses:
Wages, salaries and benefits		(80,354	)		(80,305	)		(272,581	)		(267,505	)
Selling and general expenses		(27,459	)		(27,471	)		(91,809	)		(96,938	)
Administrative expenses (inclusive of share-based    compensation expense of $53, $52, $177 and $113)		(17,842	)		(16,302	)		(58,844	)		(51,285	)
Rent expense, net		(6,292	)		(6,233	)		(20,863	)		(20,506	)
Depreciation and amortization		(14,719	)		(14,045	)		(47,891	)		(45,512	)
Advertising		(4,901	)		(4,280	)		(16,590	)		(16,042	)
Gain on sale of assets (Note 8)		—			—			11,014			—
Total operating expenses		(151,567	)		(148,636	)		(497,564	)		(497,788	)
Operating income		13,857			16,397			52,414			48,536
Loss on debt extinguishment		—			—			(34,503	)		—
Interest expense, net		(18,619	)		(18,625	)		(63,404	)		(63,023	)
Loss before income taxes		(4,762	)		(2,228	)		(45,493	)		(14,487	)
Income tax (expense) benefit		(400	)		795			(1,342	)		4,461
Net loss		(5,162	)		(1,433	)		(46,835	)		(10,026	)
Other comprehensive (loss) income		—			(13	)		—			435
Comprehensive loss	$	(5,162	)	$	(1,446	)	$	(46,835	)	$	(9,591	)

See notes to condensed consolidated financial statements.

- 2 -

TOPS HOLDING II CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	40-week periods ended
	October 3, 2015			October 4, 2014
Cash flows provided by operating activities:
Net loss	$	(46,835	)	$	(10,026	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		57,179			53,322
Loss on debt extinguishment		34,503			—
Gain on sale of assets		(11,014	)		—
Amortization of deferred financing costs		2,618			3,031
Deferred income taxes		1,334			(4,502	)
Straight-line rent adjustment		775			1,754
LIFO inventory valuation adjustments		661			2,848
Share-based compensation expense		177			113
Other		490			692
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(6,234	)		2,661
Increase in inventory, net		(1,341	)		(13,614	)
Increase in prepaid expenses and other current assets		(2,382	)		(4,701	)
Decrease in income taxes refundable		-			41
(Decrease) increase in accounts payable		(537	)		7,383
Increase (decrease) in accrued expenses and other current liabilities		22,684			(5,097	)
Increase in other long-term liabilities		1,846			1,761
Net cash provided by operating activities		53,924			35,666
Cash flows used in investing activities:
Cash paid for property and equipment		(30,692	)		(30,422	)
Cash proceeds from sale of assets		11,255			—
Net cash used in investing activities		(19,437	)		(30,422	)
Cash flows used in financing activities:
Proceeds from long-term debt borrowings		560,000			—
Repayments of long-term debt borrowings		(521,480	)		(3,307	)
Borrowings on 2017 ABL Facility		353,966			315,600
Repayments on 2017 ABL Facility		(374,466	)		(323,800	)
Debt extinguishment costs paid		(24,290	)		—
Deferred financing costs paid		(10,593	)		(637	)
Principal payments on capital leases		(6,680	)		(6,947	)
Dividends to Tops MBO Corporation		(775	)		(12,571	)
Change in bank overdraft position		(223	)		98
Purchase of treasury stock		(1	)		—
Proceeds from sale leaseback financing transactions		—			25,436
Net cash used in financing activities		(24,542	)		(6,128	)
Net increase (decrease) in cash and cash equivalents		9,945			(884	)
Cash and cash equivalents-beginning of period		26,316			29,913
Cash and cash equivalents-end of period	$	36,261		$	29,029

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 October 3, 2015, the Company operated 161 supermarkets, 160 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees under the Tops banner.  Holding II has no business operations other than the ownership of Holding I and as the issuer of the 2018 Notes (see Note 6) and a guarantor of the 2022 Notes (see Note 6).

Holding II is the reporting entity for the 2018 Notes and 2022 Notes.  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 12-week and 40-week periods ended October 3, 2015 and October 4, 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 Standards 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”).  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 October 3, 2015 or December 27, 2014.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”), which provides guidance regarding 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, 2017, 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 consolidated financial statements.

- 4 -

In April 2015, FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”), which amended Accounting Standards Codification (“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 ASU No. 2015-03.  This guidance is effective for annual reporting periods beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.  Early adoption is permitted.  During the Company’s second fiscal quarter the Company elected early adoption of ASU No. 2015-03, and reclassified debt issuance costs of $15.0 million from the line item “other assets” to the line item “long-term debt, net” in its condensed consolidated balance sheet as of December 27, 2014.

In April 2015, FASB issued ASU No. 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets” (“ASU No. 2015-04”), which amended 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 is effective for annual reporting periods beginning after December 15, 2016.  Early adoption is permitted.  The Company is currently in the process of evaluating the effect of adoption of ASU No. 2015-04 on its consolidated financial statements.

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 October 3, 2015, 50 corporate supermarkets offered pharmacy services and 51 corporate fuel centers were in operation.  As of October 4, 2014, 76 corporate supermarkets offered pharmacy services and 51 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):

	12-week periods ended										40-week periods ended
	October 3, 2015					October 4, 2014					October 3, 2015					October 4, 2014
			% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total
Non-perishables(1)	$	321,794		57.4	%	$	322,403		55.5	%	$	1,060,122		56.7	%	$	1,067,793		55.2	%
Perishables(2)		162,354		29.0	%		159,968		27.5	%		555,260		29.7	%		540,835		28.0	%
Fuel		38,275		6.8	%		54,559		9.4	%		125,764		6.7	%		180,846		9.3	%
Pharmacy		33,302		5.9	%		38,707		6.7	%		111,429		6.0	%		126,986		6.6	%
Other(3)		5,019		0.9	%		5,104		0.9	%		16,930		0.9	%		17,020		0.9	%
	$	560,744		100.0	%	$	580,741		100.0	%	$	1,869,505		100.0	%	$	1,933,480		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.

- 5 -

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.

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 October 3, 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):

	October 3, 2015		December 27,2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,052	$	1,983
Long-term debt		669,303		649,097
Total carrying value of debt instruments		671,355		651,080
Fair value of debt instruments		672,386		656,305
Excess of fair value over book value	$	1,031	$	5,225

The fair values of the 2017 Notes and 2018 Notes, which are included in long-term debt as of December 27, 2014, and the 2018 Notes and 2022 Notes (see Note 6), which are included in long-term debt as of October 3, 2015, 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, of which $0.6 million and $15.2 million were paid during the 4-week period ended December 28, 2013 and 40-week period ended October 4, 2014, respectively.

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, equipment and intangible assets.  This finalization resulted in the increase of depreciation and amortization expense of $0.1 million and the decrease of income tax benefit of $0.4 million during the 12-week period ended October 4, 2014.  The combined impact of the depreciation and amortization expense and income tax benefit adjustments resulted in a $0.5 million increase in the Company’s net loss during the 12-week period ended October 4, 2014.  In addition, this finalization resulted in the increase of depreciation and amortization expense of $0.5 million and the increase of income tax benefit of $0.3 million during the 40-week period ended October 4, 2014.  The combined impact of the

- 6 -

depreciation and amortization expense and income tax benefit adjustments resulted in a $0.2 million increase in the Company’s net loss during the 40-week period ended October 4, 2014.

3. GOODWILL AND INTANGIBLE ASSETS, NET

The following table summarizes the change in the Company’s goodwill balance during the 40-week period ended October 3, 2015 (dollars in thousands):

Balance - December 27, 2014	$	212,901
Adjustments		—
Balance - October 3, 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 12-week and 40-week periods ended October 3, 2015 and October 4, 2014.

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

	Gross					Net		Average
	Carrying		Accumulated			Carrying		Amortization
October 3, 2015	Amount		Amortization			Amount		Period
Tradename - indefinite	$	131,200	$	—		$	131,200	Indefinitelife
Customer relationships		29,200		(12,607	)		16,593		14.0
Favorable lease rights		21,550		(5,592	)		15,958		9.0
Franchise agreements		13,300		(3,445	)		9,855		14.0
Pharmacy scripts		2,800		(1,051	)		1,749		14.0
	$	198,050	$	(22,695	)	$	175,355		11.9

	Gross					Net
	Carrying		Accumulated			Carrying
December 27, 2014	Amount		Amortization			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 12-week and 40-week periods ended October 3, 2015 and October 4, 2014.

During the 12-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to intangible assets was $2.6 million and $3.0 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to intangible assets was $8.8 million and $10.1 million, respectively.  This amortization is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss.

- 7 -

Depreciation and amortization in the condensed consolidated statements of comprehensive loss during each of the 12-week periods ended October 3, 2015 and October 4, 2014 includes $0.1 million of contra-expense related to the amortization of unfavorable lease rights, which are classified in other long-term liabilities in the condensed consolidated balance sheets.  During each of the 40-week periods ended October 3, 2015 and October 4, 2014, depreciation and amortization in the condensed consolidated statements of comprehensive loss includes $0.3 million of contra-expense related to the amortization of unfavorable lease rights.  Expected future amortization of these unfavorable lease rights is contra-expense of $0.1 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 October 3, 2015, expected future amortization of intangible assets is as follows (dollars in thousands):

2015 (remaining period)	$	2,666
2016		8,181
2017		6,946
2018		5,907
2019		4,952
Thereafter		15,503

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

	October 3, 2015		December 27, 2014
Wages, taxes and benefits	$	21,641	$	18,951
Interest payable		16,624		2,269
Union medical, pension and 401(k)		14,116		8,985
Lottery		11,563		10,954
Self-insurance reserves		6,491		6,130
Professional and legal fees		4,238		3,170
Gift cards		3,238		8,974
Sales and use tax		2,726		596
Property and equipment expenditures		2,661		3,383
Utilities		2,520		3,383
Money orders		2,366		887
Repairs and maintenance		2,014		2,212
Other		14,034		12,216
	$	104,232	$	82,110

- 8 -

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 2034, 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 October 3, 2015, future minimum lease rental payments applicable to non-cancelable capital lease obligations were as follows (dollars in thousands):

2015 (remaining period)	$	7,279
2016		31,155
2017		29,194
2018		25,416
2019		22,646
Thereafter		119,228
Total minimum lease payments		234,918
Less amounts representing interest		(153,299	)
Present value of net minimum lease payments		81,619
Less current obligations		(8,524	)
Long-term cash obligations		73,095
Non-cash obligations		67,370
Total long-term capital lease obligations	$	140,465

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 nine properties for cash proceeds of $12.6 million and $25.4 million during the 12-week and 40-week periods ended October 4, 2014, respectively.  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 of the Company 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 2018 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.

- 9 -

6. DEBT

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

	October 3, 2015			December 27,2014
2022 Notes	$	560,000		$	—
2018 Notes		90,000			150,000
2017 Notes		—			460,000
Discount on 2018 Notes		(532	)		(1,100	)
Deferred financing fees		(13,347	)		(15,033	)
2017 ABL Facility		31,500			52,000
Other loans		3,734			5,213
Total debt		671,355			651,080
Current portion		(2,052	)		(1,983	)
Total long-term debt	$	669,303		$	649,097

On June 10, 2015, Holding I and Tops Markets II Corporation (collectively, the “Issuers”) issued $560.0 million in aggregate principal amount of senior secured notes due in 2022, bearing annual interest at a rate of 8.00% (the “2022 Notes”).  The proceeds from the 2022 Notes were used to fund a tender offer for, and redeem the balance of, the previously outstanding $460.0 million of senior secured notes issued by Holding I, Tops Markets and Tops Markets II Corporation (the “2017 Notes”) and to fund a partial tender offer for $60.0 million of the $150.0 million outstanding 8.75%/9.50% senior unsecured notes issued by Tops Holding II (the “2018 Notes”), including tender and redemption premiums of $23.0 million and $1.2 million, respectively, which have been recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The proceeds were also used to pay accrued and unpaid interest related to the tendered and redeemed notes and fees and expenses related to the issuance of the 2022 Notes.  The 2022 Notes mature on June 15, 2022 and require semi-annual interest payments on June 15 and December 15, beginning December 15, 2015.  The 2022 Notes are redeemable, in whole or in part, at any time on or after June 15, 2018 at specified redemption prices.  Prior to June 15, 2018, the Company may redeem the 2022 Notes in whole or in part, at a specified “make-whole” premium.

The 2022 Notes are collateralized by (i) first priority security interests, subject to certain exceptions and permitted liens, in the stock held by the Issuers and the guarantor subsidiaries, Tops Markets, 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 2022 Notes, equipment, intellectual property, and substantially all other assets of the Issuers and the Guarantors, other than those assets securing the Company’s asset-based revolving credit facility (the “2017 ABL Facility”) on a first priority basis (collectively, the “2022 Notes Priority Collateral”), and (ii) second priority security interests, subject to certain exceptions and permitted liens, in the assets of Holding II, 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”).

The 2022 Notes are guaranteed on a senior secured basis, jointly and severally, by each of the Guarantors and will in the future be guaranteed by certain of Holding I’s future domestic subsidiaries.  The 2022 Notes are also guaranteed on a senior unsecured basis by Holding II.

As discussed in Note 1, the Company adopted ASU No. 2015-03 and as a result now nets deferred financing costs against long-term debt in the Company’s condensed consolidated balance sheets.  This adoption resulted in the reclassification of unamortized deferred financing costs of $15.0 million from the line item “other assets” to the line item “long-term debt, net” in the Company’s condensed consolidated balance sheet as of December 27, 2014.  Costs associated with the 2022 Notes of $10.8 million were capitalized and are being amortized over the term of the 2022 Notes using the effective interest method.  Unamortized deferred financing costs of $8.0 million related to the 2017 Notes and $1.9 million related to the redeemed portion of the 2018 Notes and $0.4 million of the unamortized discount on the 2018 Notes were written off and recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.

During the 12-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to the deferred financing costs was $0.5 million and $0.9 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to deferred financing costs was $2.6 million and $3.0 million, respectively.  This amortization expense is included in interest expense in the condensed consolidated statements of comprehensive loss.  At October 3, 2015, long-term debt included deferred financing costs, net of accumulated amortization of $1.2 million, totaling $13.3 million.  At December 27, 2014, long-term debt included deferred financing costs, net of accumulated amortization of $7.3 million, totaling $15.0 million.

- 10 -

On May 15, 2013, Holding II issued $150.0 million of 2018 Notes.  As discussed above, on June 10, 2015, Holding II successfully tendered for and repurchased $60.0 million of 2018 Notes, resulting in a remaining outstanding principal amount of $90.0 million as of October 3, 2015.  If certain conditions are met, Holding II may be entitled to pay interest on the 2018 Notes by increasing the principal of the notes or by issuing new notes as pay-in-kind interest.  This payment in kind interest would accrue at an annual rate of 9.50%.  The $148.5 million proceeds from the 2018 Notes issuance, net of a $1.5 million original issue discount, were used to pay a $141.9 million dividend to the Holding II shareholders.  In connection with the partial tender offer for the 2018 Notes completed on June 10, 2015, $0.4 million of the unamortized discount was written off and recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The 2018 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 2022 Notes and the 2017 ABL Facility (see below), Holding I may make dividend payments to Holding II to fund the semi-annual interest payments for the 2018 Notes.  The 2018 Notes are redeemable, in whole or in part, at specified redemption prices.  

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 October 3, 2015, the unused availability under the 2017 ABL Facility was $54.9 million, after giving effect to the borrowing base calculation, $23.8 million of letters of credit outstanding and $31.5 million of 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 October 3, 2015 and December 27, 2014, the weighted average interest rates on borrowings under the 2017 ABL Facility were 2.56% 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 2022 Notes Priority Collateral.

The instruments governing the 2022 Notes, 2018 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.

- 11 -

7. INCOME TAXES

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

	12-week periods ended						40-week periods ended
	October 3,2015			October 4, 2014			October 3, 2015			October 4, 2014
Current	$	—		$	(23	)	$	(8	)	$	(41	)
Deferred		(400	)		818			(1,334	)		4,502
Total income tax (expense) benefit	$	(400	)	$	795		$	(1,342	)	$	4,461

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 12-week and 40-week periods ended October 3, 2015.  The income tax expense recognized for the 12-week and 40-week periods ended October 3, 2015 solely reflects the recognition of additional valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities.  During the 12-week and 40-week periods ended October 3, 2015, the effective tax rate would have been 39.3% and 39.1%, respectively, without the establishment of the valuation allowance for both periods.

The income tax benefit recognized during the 12-week and 40-week periods ended October 4, 2014 primarily reflects the loss before income taxes, net of the recognition of valuation allowance associated with the Company’s indefinite-lived tradename and goodwill deferred tax liabilities.  During the 12-week and 40-week periods ended October 4, 2014, the effective tax rate would have been 42.2% and 41.7%, respectively, without the establishment of the valuation allowance.

As of the beginning of Fiscal 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.

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 40-week period ended October 3, 2015.

9. SHAREHOLDERS’ DEFICIT

On January 8, 2015, the Company paid a dividend of $0.8 million to Tops MBO Co to repurchase outstanding shares of common stock of Tops MBO Co from a former Company executive.  In addition, one outstanding share of common stock 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 12-week periods ended October 3, 2015 and October 4, 2014, these rejected contributions totaled $1.2 million and $0.8 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, these rejected contributions totaled $3.6 million and $3.1 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

- 12 -

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.  During each of the 12-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $1.9 million.  During the 40-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $5.8 million and $1.9 million, respectively.  These monthly conditional payments 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 $9.6 million as of October 3, 2015, have been recorded in accounts receivable, while the aggregate rejected contributions, totaling $7.8 million as of October 3, 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 resumed warehousing and transportation functions, while C&S continues 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.  As of 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.

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 this 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 related to some of its properties.  As the Company is unaware of environmental issues that are expected to materially impact the Company’s consolidated financial statements as a whole, no amounts were accrued as of October 3, 2015 or December 27, 2014.

- 13 -

Collective Bargaining Agreements

The Company employs approximately 14,450 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% of these associates are members of Teamsters Local 264, who work in 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 April 2017 and October 2018.  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 any 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 October 3, 2015 or December 27, 2014.

- 14 -

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 October 3, 2015, we operated 161 full-service supermarkets, 160 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees under the Tops banner.

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;

· 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;

- 15 -

· 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 12-week and 40-week periods ended October 3, 2015 and October 4, 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

June 2015 Refinancing

On June 10, 2015, Holding I and Tops Markets II Corporation issued $560.0 million in aggregate principal amount of 2022 Notes, bearing annual interest at a rate of 8.00%.  The proceeds from the 2022 Notes were used to fund a tender offer for, and redeem the balance of, the previously outstanding $460.0 million of 2017 Notes and to fund a partial tender offer for $60.0 million of the $150.0 million outstanding 2018 Notes, including tender and redemption premiums of $23.0 million and $1.2 million, respectively, which have been recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The proceeds were also used to pay accrued and unpaid interest related to the tendered and redeemed notes and fees and expenses related to the issuance of the 2022 Notes.

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 40-week period ended October 3, 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.

RESULTS OF OPERATIONS

12-Week Period Ended October 3, 2015 Compared with the 12-Week Period Ended October 4, 2014

Summary

The results of operations during the 12-week period ended October 3, 2015  compared with the 12-week period ended October 4, 2014 were impacted by the January 2015 sale of inventory and pharmacy scripts related to 27 in-store pharmacies and closure of these pharmacies.  Despite a 30.3% decrease in the average retail price of fuel, related profitability improved.  In addition, we benefited from $1.6 million of savings associated with the amendment of certain operating terms of a supply agreement with C&S effective April 1, 2015.  Our operating expenses were impacted by higher labor costs reflecting an increase in the New York State minimum wage rate effective January 1, 2015, and an increase in bonus expense due to improved performance against bonus metrics.  These operating expense increases were partially offset by a decline in utility commodity rates

- 16 -

Net Sales

The following table includes the components of our net sales for the 12-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	12-week periods ended
	October 3, 2015		October 4, 2014		$ Change			% Change
Inside sales	$	522,469	$	526,182	$	(3,713	)		(0.7	)%
Fuel sales		38,275		54,559		(16,284	)		(29.8	)%
Net sales	$	560,744	$	580,741	$	(19,997	)		(3.4	)%

Inside sales decreased $3.7 million, or 0.7%, during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014, due to the $8.3 million reduction in pharmacy sales attributable to the closure of 27 in-store pharmacies during January 2015, partially offset by the $5.1 million incremental contribution of four acquired and new supermarkets opened since September 2014. Same store sales were relatively flat.  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.  Sales related to the 27 closed in-store pharmacies have been excluded from the 12-week period ended October 4, 2014 for purposes of calculating same store sales.

Fuel sales decreased during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 due to a 30.3% decrease in the average retail price per gallon, net of applicable discounts, slightly offset by a 0.7% increase in gallons sold.

Gross Profit

The following table includes a comparison of cost of goods sold, distribution costs and gross profit for the 12-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	12-week						12-week
	period ended			% of			period ended			% of			$		%
	October 3, 2015			Net Sales			October 4,2014			Net Sales			Change		Change
Cost of goods sold	$	(386,195	)		68.9	%	$	(404,739	)		69.7	%	$	18,544		4.6	%
Distribution costs		(9,125	)		1.6	%		(10,969	)		1.9	%		1,844		16.8	%
Gross profit	$	165,424			29.5	%	$	165,033			28.4	%	$	391		0.2	%

As a percentage of net sales, cost of goods sold decreased during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 due to an improvement in profitability on fuel sales, combined with a shift in product mix given the smaller proportion of relatively lower margin fuel sales.  Non-cash LIFO inventory valuation expense decreased $0.4 million from $0.6 million to $0.2 million.  Excluding the impact of LIFO, cost of goods sold as a percentage of inside sales was 67.4% and 67.3%, respectively, during the 12-week periods ended October 3, 2015 and October 4, 2014.  This slight increase was due to a $0.7 million increase in inventory shrink expense due to the combination of deflation in certain commodities and flat sales levels.

Distribution costs decreased $1.8 million during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 due to $1.3 million of savings associated with the amendment of certain operating terms of a supply agreement with C&S effective April 1, 2015.  This amount recorded in distribution costs is in addition to $0.3 million of savings classified in cost of goods sold related to the amended terms.

- 17 -

Operating Expenses

The following table includes a comparison of operating expenses for the 12-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	12-week					12-week
	period ended		% of			period ended		% of			$			%
	October 3, 2015		Net Sales			October 4,2014		Net Sales			Change			Change
Wages, salaries and benefits	$	80,354		14.3	%	$	80,305		13.8	%	$	49			0.1	%
Selling and general expenses		27,459		4.9	%		27,471		4.7	%		(12	)		(0.0	)%
Administrative expenses		17,842		3.2	%		16,302		2.8	%		1,540			9.4	%
Rent expense, net		6,292		1.1	%		6,233		1.1	%		59			0.9	%
Depreciation and amortization		14,719		2.6	%		14,045		2.4	%		674			4.8	%
Advertising		4,901		0.9	%		4,280		0.7	%		621			14.5	%
Total	$	151,567		27.0	%	$	148,636		25.5	%	$	2,931			2.0	%

Wages, Salaries and Benefits

The increase in wages, salaries and benefits as a percentage of net sales during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 reflects a $0.75 per hour minimum wage rate increase in New York State effective January 1, 2015.  Additionally, we experienced a $1.3 million increase in bonus expense due to improved performance against bonus metrics.

Selling and General Expenses

Selling and general expenses remained relatively consistent as a percentage of net sales during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014.

Administrative Expenses

The increase in administrative expenses during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 is due to a $1.3 million increase in bonus expense reflecting improved performance against budget metrics.  

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 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014.

Depreciation and Amortization

Depreciation and amortization remained relatively consistent during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014.

Advertising

Advertising remained relatively consistent as a percentage of net sales during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014.

Interest Expense, Net

Interest related to our long-term debt decreased $0.6 million due to a lower average borrowing rate as a result of our June 2015 financing activities.  This was offset by a $0.6 million increase in interest related to capital lease obligations due to the reset of repayment amortization schedules following the amendments of certain lease agreements.

- 18 -

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 12-week period ended October 3, 2015.  The income tax expense recognized for the 12-week period ended October 3, 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 39.3% without the establishment of the valuation allowance.

The income tax benefit recognized for the 12-week period ended October 4, 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 effective tax rate would have been 42.2% without the impact of the valuation allowance establishment.

Net Loss

Our net loss increased $3.7 million during the 12-week period ended October 3, 2015 compared with the 12-week period ended October 4, 2014 for the reasons described above.

40-Week Period Ended October 3, 2015 Compared with the 40-Week Period Ended October 4, 2014

Summary

The results of operations during the 40-week period ended October 3, 2015  compared with the 40-week period ended October 4, 2014 were impacted by the January 2015 sale of inventory and pharmacy scripts related to 27 in-store pharmacies and closure of these pharmacies.  Despite a 31.3% decrease in the average retail price of fuel, related profitability improved.  In addition, we benefited from $3.7 million of savings associated with the amendment of certain operating terms of a supply agreement with C&S effective April 1, 2015.  Our operating expenses were impacted by higher labor costs reflecting an increase in the New York State minimum wage rate, an increase in bonus expense due to improved performance against bonus metrics and an increase in self-insured workers’ compensation expense driven by assumption changes in the most recent actuarial valuation of claims reserves.  These operating expense increases were partially offset by a decline in utility commodity rates.  The sale of pharmacy scripts in January 2015 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 40-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	40-week periods ended
	October 3, 2015		October 4, 2014		$ Change			% Change
Inside sales	$	1,743,741	$	1,752,634	$	(8,893	)		(0.5	)%
Fuel sales		125,764		180,846		(55,082	)		(30.5	)%
Net sales	$	1,869,505	$	1,933,480	$	(63,975	)		(3.3	)%

Inside sales decreased $8.9 million, or 0.5%, during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014, due to the $24.9 million reduction in pharmacy sales attributable to the closure of 27 in-store pharmacies during January 2015, partially offset by the $13.5 million incremental contribution of six acquired and new supermarkets opened since July 2014.  Same store sales decreased by 0.16%.  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.  Sales related to the 27 closed in-store pharmacies have been excluded from both of the 40-week periods ended October 3, 2015 and October 4, 2014 for purposes of calculating same store sales.

Fuel sales decreased during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 due to a 31.3% decrease in the average retail price per gallon, net of applicable discounts, slightly offset by a 1.2% increase in gallons sold due to the addition of four new fuel stations since February 2014.

- 19 -

Gross Profit

The following table includes a comparison of cost of goods sold, distribution costs and gross profit for the 40-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	40-week						40-week
	period ended			% of			period ended			% of			$		%
	October 3,2015			Net Sales			October 4, 2014			Net Sales			Change		Change
Cost of goods sold	$	(1,284,579	)		68.7	%	$	(1,349,355	)		69.8	%	$	64,776		4.8	%
Distribution costs		(34,948	)		1.9	%		(37,801	)		2.0	%		2,853		7.5	%
Gross profit	$	549,978			29.4	%	$	546,324			28.3	%	$	3,654		0.7	%

As a percentage of net sales, cost of goods sold decreased during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 due to an improvement in profitability on fuel sales, combined with a shift in product mix given the smaller proportion of relatively lower margin fuel sales.  Non-cash LIFO inventory valuation expense decreased from $2.8 million during the 40-week period ended October 4, 2014 to $0.7 million during the 40-week period ended October 3, 2015.  Excluding the impact of non-cash LIFO expense, cost of goods sold as a percentage of inside sales was 67.3% and 67.2%, respectively, during the 40-week periods ended October 3, 2015 and October 4, 2014.  This slight increase was attributable to a $3.6 million increase in inventory shrink expense due to the combination of deflation in certain commodities and flat sales levels.

As a percentage of net sales, distribution costs remained relatively consistent during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014.  Distribution costs were negatively impacted by a $1.5 million increase in self-insured workers’ compensation expense related to our warehouse and distribution associates.  This increase was driven largely by assumption changes in the most recent actuarial valuation of claims reserves, including the estimated future costs to settle currently outstanding claims.  The increase in workers’ compensation expense was offset by $3.0 million of savings associated with the amendment of certain operating terms of a supply agreement with C&S effective April 1, 2015.  This amount recorded in distribution costs is in addition to $0.7 million of savings classified in cost of goods sold related to the amended terms.

Operating Expenses

The following table includes a comparison of operating expenses for the 40-week periods ended October 3, 2015 and October 4, 2014.

(Dollars in thousands)

	40-week						40-week
	period ended			% of			period ended		% of			$			%
	October 3,2015			Net Sales			October 4, 2014		Net Sales			Change			Change
Wages, salaries and benefits	$	272,581			14.6	%	$	267,505		13.8	%	$	5,076			1.9	%
Selling and general expenses		91,809			4.9	%		96,938		5.0	%		(5,129	)		(5.3	)%
Administrative expenses		58,844			3.1	%		51,285		2.7	%		7,559			14.7	%
Rent expense, net		20,863			1.1	%		20,506		1.1	%		357			1.7	%
Depreciation and amortization		47,891			2.6	%		45,512		2.4	%		2,379			5.2	%
Advertising		16,590			0.9	%		16,042		0.8	%		548			3.4	%
Gain on sale of assets		(11,014	)		(0.6	)%		—	N/A				(11,014	)	N/A
Total	$	497,564			26.6	%	$	497,788		25.8	%	$	(224	)		0.0	%

Wages, Salaries and Benefits

The increase in wages, salaries and benefits as a percentage of net sales during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 reflects a $0.75 per hour minimum wage rate increase in New York State effective January 1, 2015.  Additionally, we experienced a $2.7 million increase in bonus expense due to improved performance against bonus metrics, in part due to higher budget metrics in the 2014 period that resulted in only $1.5 million of bonus expense recognition.  In connection with the January 2015 closure of 27 in-store pharmacies, we incurred $1.0 million of non-recurring severance costs.  Also, our pension contributions increased $1.2 million as prescribed by our collective bargaining agreements, and medical costs associated with non-union supermarket associates increased $1.1 million.

- 20 -

Selling and General Expenses

Selling and general expenses decreased $5.1 million during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 due to a $5.6 million decrease in utility costs attributable to lower electricity commodity costs.

Administrative Expenses

Administrative expenses increased $7.6 million during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 due to a $4.5 million increase in bonus expense reflecting improved performance against budget metrics, in part due to a higher budget metric in the 2014 period that resulted in no bonus expense recognition during such period.  In addition, the increase reflects normal wage adjustments, increased associate healthcare costs and increased depreciation expense related to software for our new point of sale system.

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 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014.

Depreciation and Amortization

Depreciation and amortization remained relatively consistent during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014.

Advertising

Advertising remained relatively consistent during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 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 40-week period ended October 3, 2015.

Loss on Debt Extinguishment

During June 2015, we satisfied and discharged our obligations under our 2017 Notes and redeemed $60.0 million of our 2018 Notes.  In connection with these financing activities, we recorded a $34.5 million loss on debt extinguishment during the 40-week period ended October 3, 2015.  See Note 6 to our condensed consolidated financial statements in Item 1 of this 10-Q for further details.

Interest Expense, Net

Interest related to our long-term debt decreased $1.2 million due to a lower average borrowing rate as a result of our June 2015 financing activities.  This was offset by a $1.6 million increase in interest related to capital lease obligations due to the reset of repayment amortization schedules following the amendments of certain lease agreements.

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 40-week period ended October 3, 2015.  The income tax expense recognized during the 40-week period ended October 3, 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 39.1% without the establishment of the valuation allowance.

The income tax benefit recognized during the 40-week period ended October 4, 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 30.8%. The effective tax rate would have been 41.7% without the impact of the valuation allowance establishment.

- 21 -

Net Loss

Our net loss increased $36.8 million during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014 for the reasons described above.

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 October 3, 2015, the unused availability under our 2017 ABL Facility was $54.9 million, after giving effect to the borrowing base calculation, $23.8 million of letters of credit outstanding and $31.5 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.

On June 10, 2015, Holding I and Tops Markets II Corporation issued $560.0 million in aggregate principal amount of 2022 Notes, bearing annual interest of 8.00%.  The proceeds from the 2022 Notes were used to fund a tender offer for, and redeem the balance of, the previously outstanding $460.0 million of 2017 Notes and to fund a partial tender offer for $60.0 million of the $150.0 million outstanding 2018 Notes, including tender and redemption premiums of $23.0 million and $1.2 million, respectively, which have been recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The proceeds were also used to pay accrued and unpaid interest related to the tendered and redeemed notes and fees and expenses related to the issuance of the 2022 Notes.  See Note 6 to our condensed consolidated financial statements of Item 1 in this 10-Q.

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

On December 1, 2013, the Management Purchase was consummated.  In connection with the Management Purchase, we incurred $15.8 million of transaction costs, of which $0.6 million were paid as of December 28, 2013, with $15.2 million paid during the 40-week period ended October 4, 2014.

On December 15, 2015, semi-annual cash interest payments totaling $26.8 million are payable related to our 2022 Notes and 2018 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 June 15, 2022 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)

	40-week periods ended
	October 3, 2015			October 4, 2014
Cash provided by (used in):
Operating activities	$	53,924		$	35,666
Investing activities		(19,437	)		(30,422	)
Financing activities		(24,542	)		(6,128	)

Cash provided by operating activities during the 40-week period ended October 3, 2015 increased $18.3 million compared with the 40-week period ended October 4, 2014.  This increase was primarily attributable to $15.2 million of transaction fees related to the Management Purchase that were paid during the 40-week period ended October 4, 2014, combined with improved cash earnings.

- 22 -

Cash used in investing activities decreased $11.0 million during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014, primarily due to net cash proceeds of $11.3 million from the sale of pharmacy scripts during January 2015.  We expect to invest $34 million to $38 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 financing activities increased $18.4 million during the 40-week period ended October 3, 2015 compared with the 40-week period ended October 4, 2014.  The increase reflects a $12.3 million increase in 2017 ABL Facility net repayments from $8.2 million during the 40-week period ended October 4, 2014 to $20.5 million during the 40-week period ended October 3, 2015.  Partially offsetting this impact were cash flows related to the June 2015 refinancing activities, including the proceeds from the 2022 Notes of $560.0 million, the tender offer for, and redemption of the balance of the previously outstanding 2017 Notes and partial tender offer for the 2018 Notes, and fees and expenses incurred related to the 2022 Notes issuance.  The 40-week period ended October 4, 2014 also includes $25.4 million of cash proceeds from the sale of nine supermarket locations as part of sale-leaseback financing transactions.

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 40-week periods ended October 3, 2015 and October 4, 2014, we made contributions of $9.4 million and $8.1 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 40-week periods ended October 3, 2015 and October 4, 2014, our required contributions to the Fund were $3.9 million and $3.1 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.  During each of the 12-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $1.9 million.  During the 40-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $5.8 million and $1.9 million, respectively.  These monthly conditional payments 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.

- 23 -

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements at October 3, 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.

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 included in our Annual Report on Form 10-K 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

The table below provides information about our outstanding debt as of October 3, 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 October 3, 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	$	504		$	2,076		$	681		$	90,036		$	37		$	560,400		$	654,233
Average interest rate		4.6	%		4.6	%		4.7	%		8.7	%		4.0	%		8.0	%
Variable rate	$	—		$	—		$	31,500		$	—		$	—		$	—		$	31,500
Average interest rate	N/A			N/A				2.6	%	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 October 3, 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 October 3, 2015.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in the Company’s internal control over financial reporting during the 40-week period ended October 3, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 24 -

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.
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

* Filed herewith.

** Furnished herewith.

- 25 -

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
	Executive Vice President and Chief Financial Officer
	November 9, 2015

- 26 -

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: November 9, 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: November 9, 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 12-week period ended October 3, 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

November 9, 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 12-week period ended October 3, 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

November 9, 2015

XML

Gain on Sale of Assets - Additional Information (Detail) $ in Thousands	1 Months Ended	9 Months Ended
	Jan. 31, 2015 USD ($) Location	Oct. 03, 2015 USD ($)
Discontinued Operations And Disposal Groups [Abstract]
Number of locations pharmacy scripts and inventory sold | Location	27
Proceeds from sale of assets	$ 14,900
Gain on sale of assets		$ 11,014
Carrying value of sold inventory		3,200
Direct selling expenses on sale of assets		$ 700

XML

Capital Lease Obligations - Additional Information (Detail) - USD ($)	3 Months Ended	9 Months Ended
	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Leases [Line Items]
Leases expire year		2034
Leases term		25 years
Proceeds from sale leaseback financing transactions	$ 12,600,000		$ 25,436,000
Underlying cash payments to remove the related land and obligations		$ 0
Minimum [Member]
Leases [Line Items]
Capital lease expiration year		2018
Maximum [Member]
Leases [Line Items]
Capital lease expiration year		2068

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies - Summary of Sales Revenue by Type of Product (Detail) - USD ($) $ in Thousands		2 Months Ended	3 Months Ended		9 Months Ended
		Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Sales Revenue, Goods, Net [Abstract]
Sales revenue		$ 580,741	$ 560,744	$ 580,741	$ 1,869,505	$ 1,933,480
Sale revenue percentage		100.00%	100.00%		100.00%	100.00%
Non-perishables [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	[1]	$ 322,403	$ 321,794		$ 1,060,122	$ 1,067,793
Sale revenue percentage	[1]	55.50%	57.40%		56.70%	55.20%
Perishables [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	[2]	$ 159,968	$ 162,354		$ 555,260	$ 540,835
Sale revenue percentage	[2]	27.50%	29.00%		29.70%	28.00%
Pharmacy [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue		$ 38,707	$ 33,302		$ 111,429	$ 126,986
Sale revenue percentage		6.70%	5.90%		6.00%	6.60%
Other Products [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue	[3]	$ 5,104	$ 5,019		$ 16,930	$ 17,020
Sale revenue percentage	[3]	0.90%	0.90%		0.90%	0.90%
Fuel [Member]
Sales Revenue, Goods, Net [Abstract]
Sales revenue		$ 54,559	$ 38,275		$ 125,764	$ 180,846
Sale revenue percentage		9.40%	6.80%		6.70%	9.30%

[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

Income Taxes - Summary of Income Tax (Expense) Benefit (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Income Tax Disclosure [Abstract]
Current		$ (23)	$ (8)	$ (41)
Deferred	$ (400)	818	(1,334)	4,502
Total income tax (expense) benefit	$ (400)	$ 795	$ (1,342)	$ 4,461

XML

Goodwill and Intangible Assets, Net

9 Months Ended

Oct. 03, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

3. GOODWILL AND INTANGIBLE ASSETS, NET

The following table summarizes the change in the Company’s goodwill balance during the 40-week period ended October 3, 2015 (dollars in thousands):

Balance - December 27, 2014	$	212,901
Adjustments		—
Balance - October 3, 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 12-week and 40-week periods ended October 3, 2015 and October 4, 2014.

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

	Gross					Net		Average
	Carrying		Accumulated			Carrying		Amortization
October 3, 2015	Amount		Amortization			Amount		Period
Tradename - indefinite	$	131,200	$	—		$	131,200	Indefinitelife
Customer relationships		29,200		(12,607	)		16,593		14.0
Favorable lease rights		21,550		(5,592	)		15,958		9.0
Franchise agreements		13,300		(3,445	)		9,855		14.0
Pharmacy scripts		2,800		(1,051	)		1,749		14.0
	$	198,050	$	(22,695	)	$	175,355		11.9

	Gross					Net
	Carrying		Accumulated			Carrying
December 27, 2014	Amount		Amortization			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 12-week and 40-week periods ended October 3, 2015 and October 4, 2014.

During the 12-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to intangible assets was $2.6 million and $3.0 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to intangible assets was $8.8 million and $10.1 million, respectively.  This amortization is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss.

Depreciation and amortization in the condensed consolidated statements of comprehensive loss during each of the 12-week periods ended October 3, 2015 and October 4, 2014 includes $0.1 million of contra-expense related to the amortization of unfavorable lease rights, which are classified in other long-term liabilities in the condensed consolidated balance sheets.  During each of the 40-week periods ended October 3, 2015 and October 4, 2014, depreciation and amortization in the condensed consolidated statements of comprehensive loss includes $0.3 million of contra-expense related to the amortization of unfavorable lease rights.  Expected future amortization of these unfavorable lease rights is contra-expense of $0.1 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 October 3, 2015, expected future amortization of intangible assets is as follows (dollars in thousands):

2015 (remaining period)	$	2,666
2016		8,181
2017		6,946
2018		5,907
2019		4,952
Thereafter		15,503

XML

Goodwill and Intangible Assets Net - Summary of Intangible Assets, Net of Accumulated Amortization (Detail) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Dec. 27, 2014
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 198,050	$ 198,100
Accumulated Amortization	(22,695)	(13,941)
Net Carrying Amount	$ 175,355	184,159
Average Amortization Period	11 years 10 months 24 days
Tradename - Indefinite [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 131,200	131,200
Net Carrying Amount	$ 131,200	131,200
Average Amortization Period, Indefinite Life	Indefinite life
Customer Relationships [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 29,200	29,200
Accumulated Amortization	(12,607)	(7,913)
Net Carrying Amount	$ 16,593	21,287
Average Amortization Period	14 years
Favorable Lease Rights [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 21,550	21,600
Accumulated Amortization	(5,592)	(3,269)
Net Carrying Amount	$ 15,958	18,331
Average Amortization Period	9 years
Franchise Agreements [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 13,300	13,300
Accumulated Amortization	(3,445)	(2,115)
Net Carrying Amount	$ 9,855	11,185
Average Amortization Period	14 years
Pharmacy Scripts [Member]
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	$ 2,800	2,800
Accumulated Amortization	(1,051)	(644)
Net Carrying Amount	$ 1,749	$ 2,156
Average Amortization Period	14 years

XML

Goodwill and Intangible Assets Net - Summary of Change in Goodwill (Detail) $ in Thousands	9 Months Ended
	Oct. 03, 2015 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill, Beginning Balance	$ 212,901
Adjustments	0
Goodwill, Ending Balance	$ 212,901

XML

Goodwill and Intangible Assets Net - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 2,600,000	$ 3,000,000	$ 8,800,000	$ 10,100,000
Contra-expense related to amortization of unfavorable lease rights	100,000	100,000	300,000	300,000
Future amortization expense, 2015 (remaining period)	100,000		100,000
Future amortization expense, 2016	300,000		300,000
Future amortization expense, 2017	300,000		300,000
Future amortization expense, 2018	300,000		300,000
Future amortization expense, 2019	300,000		300,000
Future amortization expense, Thereafter	800,000		800,000
Tradename - Indefinite [Member]
Finite-Lived Intangible Assets [Line Items]
Impairment	$ 0	$ 0	$ 0	$ 0

XML

Goodwill and Intangible Assets Net - Summary of Expected Future Amortization of Intangible Assets (Detail) $ in Thousands	Oct. 03, 2015 USD ($)
Finite Lived Intangible Assets Future Amortization Expense [Abstract]
Future amortization expense, 2015 (remaining period)	$ 2,666
Future amortization expense, 2016	8,181
Future amortization expense, 2017	6,946
Future amortization expense, 2018	5,907
Future amortization expense, 2019	4,952
Future amortization expense, Thereafter	$ 15,503

XML

Business Acquisitions

9 Months Ended

Oct. 03, 2015

Business Combinations [Abstract]

Business Acquisitions

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, of which $0.6 million and $15.2 million were paid during the 4-week period ended December 28, 2013 and 40-week period ended October 4, 2014, respectively.

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, equipment and intangible assets.  This finalization resulted in the increase of depreciation and amortization expense of $0.1 million and the decrease of income tax benefit of $0.4 million during the 12-week period ended October 4, 2014.  The combined impact of the depreciation and amortization expense and income tax benefit adjustments resulted in a $0.5 million increase in the Company’s net loss during the 12-week period ended October 4, 2014.  In addition, this finalization resulted in the increase of depreciation and amortization expense of $0.5 million and the increase of income tax benefit of $0.3 million during the 40-week period ended October 4, 2014.  The combined impact of the depreciation and amortization expense and income tax benefit adjustments resulted in a $0.2 million increase in the Company’s net loss during the 40-week period ended October 4, 2014.

XML

Accrued Expenses and Other Current Liabilities - Summary of Accrued Expenses and Other Current Liabilities (Detail) - USD ($) $ in Thousands	Oct. 03, 2015	Dec. 27, 2014
Other Liabilities Disclosure [Abstract]
Wages, taxes and benefits	$ 21,641	$ 18,951
Interest payable	16,624	2,269
Union medical, pension and 401(k)	14,116	8,985
Lottery	11,563	10,954
Self-insurance reserves	6,491	6,130
Professional and legal fees	4,238	3,170
Gift cards	3,238	8,974
Sales and use tax	2,726	596
Property and equipment expenditures	2,661	3,383
Utilities	2,520	3,383
Money orders	2,366	887
Repairs and maintenance	2,014	2,212
Other	14,034	12,216
Accrued expenses and other current liabilities, Total	$ 104,232	$ 82,110

XML

Shareholders' Deficit - Additional Information (Detail) $ in Millions	Jan. 08, 2015 USD ($) shares
Equity [Abstract]
Dividends paid | $	$ 0.8
Common shares repurchased	1

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Oct. 03, 2015	Dec. 27, 2014
Current assets:
Cash and cash equivalents	$ 36,261	$ 26,316
Accounts receivable, net	70,364	64,130
Inventory, net	149,723	149,284
Prepaid expenses and other current assets	13,554	11,172
Income taxes refundable	43	43
Current deferred tax assets	3,456	3,456
Total current assets	273,401	254,401
Property and equipment, net	373,639	385,889
Goodwill	212,901	212,901
Intangible assets, net	175,355	184,159
Total assets	1,035,296	1,037,350
Current liabilities:
Accounts payable	85,225	85,985
Accrued expenses and other current liabilities	104,232	82,110
Current portion of capital lease obligations	8,524	8,653
Current portion of long-term debt	2,052	1,983
Total current liabilities	200,033	178,731
Capital lease obligations	140,465	140,315
Long-term debt, net	669,303	649,097
Other long-term liabilities	35,980	33,591
Non-current deferred tax liabilities	46,716	45,383
Total liabilities	$ 1,092,497	$ 1,047,117
Commitments and contingencies
Common stock ($0.001 par value; 300,000 authorized shares, 126,560 shares issued and 126,559 shares outstanding as of October 3, 2015 and 126,560 shares issued and outstanding as of December 27, 2014)	$ 0	$ 0
Treasury stock (at cost; 1 share as of October 3, 2015)	(1)
Paid-in capital	7,856	8,454
Accumulated deficit	(63,384)	(16,549)
Accumulated other comprehensive loss, net of tax	(1,672)	(1,672)
Total shareholders' deficit	(57,201)	(9,767)
Total liabilities and shareholders' deficit	$ 1,035,296	$ 1,037,350

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Oct. 04, 2014
Cash flows provided by operating activities:
Net loss	$ (46,835)	$ (10,026)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	57,179	53,322
Loss on debt extinguishment	34,503
Gain on sale of assets	(11,014)
Amortization of deferred financing costs	2,618	3,031
Deferred income taxes	1,334	(4,502)
Straight-line rent adjustment	775	1,754
LIFO inventory valuation adjustments	661	2,848
Share-based compensation expense included in administrative expenses	177	113
Other	490	692
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(6,234)	2,661
Increase in inventory, net	(1,341)	(13,614)
Increase in prepaid expenses and other current assets	(2,382)	(4,701)
Decrease in income taxes refundable		41
(Decrease) increase in accounts payable	(537)	7,383
Increase (decrease) in accrued expenses and other current liabilities	22,684	(5,097)
Increase in other long-term liabilities	1,846	1,761
Net cash provided by operating activities	53,924	35,666
Cash flows used in investing activities:
Cash paid for property and equipment	(30,692)	(30,422)
Cash proceeds from sale of assets	11,255
Net cash used in investing activities	(19,437)	(30,422)
Cash flows used in financing activities:
Proceeds from long-term debt borrowings	560,000
Repayments of long-term debt borrowings	(521,480)	(3,307)
Borrowings on 2017 ABL Facility	353,966	315,600
Repayments on 2017 ABL Facility	(374,466)	(323,800)
Debt extinguishment costs paid	(24,290)
Deferred financing costs paid	(10,593)	(637)
Principal payments on capital leases	(6,680)	(6,947)
Dividends to Tops MBO Corporation	(775)	(12,571)
Change in bank overdraft position	(223)	98
Purchase of treasury stock	(1)
Proceeds from sale leaseback financing transactions		25,436
Net cash used in financing activities	(24,542)	(6,128)
Net increase (decrease) in cash and cash equivalents	9,945	(884)
Cash and cash equivalents-beginning of period	26,316	29,913
Cash and cash equivalents-end of period	$ 36,261	$ 29,029

XML

Debt - Summary of Long-term Debt (Detail) - USD ($) $ in Thousands	Oct. 03, 2015	Dec. 27, 2014
Secured Debt [Abstract]
Deferred financing fees	$ (13,347)	$ (15,033)
Other loans	3,734	5,213
Total carrying value of debt instruments	671,355	651,080
Current portion	(2,052)	(1,983)
Total long-term debt	669,303	649,097
2017 ABL Facility [Member]
Secured Debt [Abstract]
ABL Facility	31,500	52,000
2022 Notes [Member]
Secured Debt [Abstract]
Notes	560,000
2018 Notes [Member]
Secured Debt [Abstract]
Notes	90,000	150,000
Discount on notes	$ (532)	(1,100)
2017 Notes [Member]
Secured Debt [Abstract]
Notes		$ 460,000

XML

Debt (Tables)

9 Months Ended

Oct. 03, 2015

Debt Disclosure [Abstract]

Summary of Long-term Debt

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

	October 3, 2015			December 27,2014
2022 Notes	$	560,000		$	—
2018 Notes		90,000			150,000
2017 Notes		—			460,000
Discount on 2018 Notes		(532	)		(1,100	)
Deferred financing fees		(13,347	)		(15,033	)
2017 ABL Facility		31,500			52,000
Other loans		3,734			5,213
Total debt		671,355			651,080
Current portion		(2,052	)		(1,983	)
Total long-term debt	$	669,303		$	649,097

XML

Debt - Additional Information (Detail) - USD ($)				3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 10, 2015	Nov. 29, 2013	May. 15, 2013	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014	Dec. 27, 2014	Dec. 14, 2012
Debt Instrument [Line Items]
Repayments of long-term debt borrowings						$ 521,480,000	$ 3,307,000
Redemption premium payment						24,290,000
Unamortized deferred financing costs								$ 15,000,000
Amortization of deferred financing costs				$ 500,000	$ 900,000	2,618,000	$ 3,031,000
Net of accumulated amortization				1,200,000		1,200,000		7,300,000
Deferred financing costs				13,300,000		13,300,000		15,000,000
Proceeds from long-term debt borrowings						$ 560,000,000
2017 ABL Facility [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity in ABL Facility									$ 125,000,000
Credit facility maturity date						Dec. 14, 2017
Unused availability under the ABL Facility				54,900,000		$ 54,900,000
Line of credit facility, amount outstanding				31,500,000		$ 31,500,000		$ 52,000,000
Weighted average interest rate on borrowings under the ABL Facility						2.56%		2.24%
2017 ABL Facility [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Letters of credit outstanding				23,800,000		$ 23,800,000		$ 20,700,000
2017 ABL Facility [Member] | LIBOR Plus [Member]
Debt Instrument [Line Items]
Debt instrument interest rate description						150 to 200 basis points
2017 ABL Facility [Member] | Prime Rate Plus [Member]
Debt Instrument [Line Items]
Debt instrument interest rate description						50 to 100 basis points
Maximum [Member] | 2017 ABL Facility [Member]
Debt Instrument [Line Items]
Increase in capacity upon met specified condition									$ 50,000,000
2022 Notes [Member]
Debt Instrument [Line Items]
Senior secured notes issued	$ 560,000,000
Interest rate, notes	8.00%
Debt instrument carrying amount				560,000,000		$ 560,000,000
Maturity date of senior notes	Jun. 15, 2022
Semi-annual interest payments date						The 2022 Notes mature on June 15, 2022 and require semi-annual interest payments on June 15 and December 15, beginning December 15, 2015.
Capitalized cost						$ 10,800,000
2017 Notes [Member]
Debt Instrument [Line Items]
Repayments of long-term debt borrowings	$ 460,000,000
Debt instrument carrying amount								460,000,000
Redemption premium payment	23,000,000
Unamortized deferred financing costs						8,000,000
2018 Notes [Member]
Debt Instrument [Line Items]
Debt instrument repurchased	60,000,000
Debt instrument carrying amount				90,000,000		$ 90,000,000		150,000,000
Redemption premium payment	$ 1,200,000
Semi-annual interest payments date						The 2018 Notes mature June 15, 2018 and require semi-annual interest payments on June 15 and December 15.
Unamortized deferred financing costs						$ 1,900,000
Unamortized discount written off						400,000
Debt original issue discount				$ 532,000		$ 532,000		$ 1,100,000
Dividend to shareholders			$ 141,900,000
2018 Notes [Member] | Holding II [Member]
Debt Instrument [Line Items]
Senior secured notes issued			$ 150,000,000
Interest rate, notes				9.50%		9.50%
Debt instrument carrying amount				$ 90,000,000		$ 90,000,000
Maturity date of senior notes			Jun. 15, 2018
Proceeds from long-term debt borrowings			$ 148,500,000
Debt original issue discount			$ 1,500,000
8.75% Senior Unsecured Notes [Member] | Holding II [Member]
Debt Instrument [Line Items]
Interest rate, notes	8.75%
9.50% Senior Unsecured Notes [Member] | Holding II [Member]
Debt Instrument [Line Items]
Interest rate, notes	9.50%
MBO Co Loan [Member]
Debt Instrument [Line Items]
Debt instrument carrying amount		$ 12,300,000
Debt instrument interest rate description						LIBOR plus a margin of 300 basis points
Interest rate of term loan		3.00%

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions	9 Months Ended		12 Months Ended
	Oct. 03, 2015 Store Segment	Oct. 04, 2014 Store	Dec. 27, 2014 USD ($)
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Debt issuance costs | $			$ 15.0
Number of reportable segment | Segment	1
Fuel [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Services offered by supermarkets	51	51
Supermarkets [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	161
Supermarkets [Member] | Tops Markets, LLC [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	160
Additional operated supermarkets by franchisees	5
Supermarkets [Member] | Orchard Fresh [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Number of retail supermarkets	1
Pharmacy [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Services offered by supermarkets	50	76

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Oct. 03, 2015

Organization Consolidation And Presentation Of Financial Statements [Abstract]

The Company, Basis of Presentation and Summary of Significant Accounting Policies

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 October 3, 2015, the Company operated 161 supermarkets, 160 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees under the Tops banner.  Holding II has no business operations other than the ownership of Holding I and as the issuer of the 2018 Notes (see Note 6) and a guarantor of the 2022 Notes (see Note 6).

Holding II is the reporting entity for the 2018 Notes and 2022 Notes.  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 12-week and 40-week periods ended October 3, 2015 and October 4, 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 Standards 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”).  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 October 3, 2015 or December 27, 2014.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”), which provides guidance regarding 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, 2017, 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 consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”), which amended Accounting Standards Codification (“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 ASU No. 2015-03.  This guidance is effective for annual reporting periods beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.  Early adoption is permitted.  During the Company’s second fiscal quarter the Company elected early adoption of ASU No. 2015-03, and reclassified debt issuance costs of $15.0 million from the line item “other assets” to the line item “long-term debt, net” in its condensed consolidated balance sheet as of December 27, 2014.

In April 2015, FASB issued ASU No. 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets” (“ASU No. 2015-04”), which amended 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 is effective for annual reporting periods beginning after December 15, 2016.  Early adoption is permitted.  The Company is currently in the process of evaluating the effect of adoption of ASU No. 2015-04 on its consolidated financial statements.

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 October 3, 2015, 50 corporate supermarkets offered pharmacy services and 51 corporate fuel centers were in operation.  As of October 4, 2014, 76 corporate supermarkets offered pharmacy services and 51 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):

	12-week periods ended										40-week periods ended
	October 3, 2015					October 4, 2014					October 3, 2015					October 4, 2014
			% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total
Non-perishables(1)	$	321,794		57.4	%	$	322,403		55.5	%	$	1,060,122		56.7	%	$	1,067,793		55.2	%
Perishables(2)		162,354		29.0	%		159,968		27.5	%		555,260		29.7	%		540,835		28.0	%
Fuel		38,275		6.8	%		54,559		9.4	%		125,764		6.7	%		180,846		9.3	%
Pharmacy		33,302		5.9	%		38,707		6.7	%		111,429		6.0	%		126,986		6.6	%
Other(3)		5,019		0.9	%		5,104		0.9	%		16,930		0.9	%		17,020		0.9	%
	$	560,744		100.0	%	$	580,741		100.0	%	$	1,869,505		100.0	%	$	1,933,480		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.

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 October 3, 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):

	October 3, 2015		December 27,2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,052	$	1,983
Long-term debt		669,303		649,097
Total carrying value of debt instruments		671,355		651,080
Fair value of debt instruments		672,386		656,305
Excess of fair value over book value	$	1,031	$	5,225

The fair values of the 2017 Notes and 2018 Notes, which are included in long-term debt as of December 27, 2014, and the 2018 Notes and 2022 Notes (see Note 6), which are included in long-term debt as of October 3, 2015, 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.

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Oct. 03, 2015	Dec. 27, 2014
Statement Of Financial Position [Abstract]
Common shares, par value	$ 0.001	$ 0.001
Common shares, authorized	300,000	300,000
Common shares, issued	126,560	126,560
Common shares, outstanding	126,559	126,560
Treasury stock, shares	1

XML

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

9 Months Ended

Oct. 03, 2015

Organization Consolidation And Presentation Of Financial Statements [Abstract]

The Company

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 October 3, 2015, the Company operated 161 supermarkets, 160 under the Tops banner and one under the Orchard Fresh banner, with an additional five supermarkets operated by franchisees under the Tops banner.  Holding II has no business operations other than the ownership of Holding I and as the issuer of the 2018 Notes (see Note 6) and a guarantor of the 2022 Notes (see Note 6).

Holding II is the reporting entity for the 2018 Notes and 2022 Notes.  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

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

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 12-week and 40-week periods ended October 3, 2015 and October 4, 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

Recently Issued Accounting Pronouncements

In April 2014, the Financial Accounting Standards 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”).  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 October 3, 2015 or December 27, 2014.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU No. 2014-09”), which provides guidance regarding 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, 2017, 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 consolidated financial statements.

In April 2015, FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU No. 2015-03”), which amended Accounting Standards Codification (“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 ASU No. 2015-03.  This guidance is effective for annual reporting periods beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.  Early adoption is permitted.  During the Company’s second fiscal quarter the Company elected early adoption of ASU No. 2015-03, and reclassified debt issuance costs of $15.0 million from the line item “other assets” to the line item “long-term debt, net” in its condensed consolidated balance sheet as of December 27, 2014.

In April 2015, FASB issued ASU No. 2015-04, “Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets” (“ASU No. 2015-04”), which amended 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 is effective for annual reporting periods beginning after December 15, 2016.  Early adoption is permitted.  The Company is currently in the process of evaluating the effect of adoption of ASU No. 2015-04 on its consolidated financial statements.

Segments

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 October 3, 2015, 50 corporate supermarkets offered pharmacy services and 51 corporate fuel centers were in operation.  As of October 4, 2014, 76 corporate supermarkets offered pharmacy services and 51 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):

	12-week periods ended										40-week periods ended
	October 3, 2015					October 4, 2014					October 3, 2015					October 4, 2014
			% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total
Non-perishables(1)	$	321,794		57.4	%	$	322,403		55.5	%	$	1,060,122		56.7	%	$	1,067,793		55.2	%
Perishables(2)		162,354		29.0	%		159,968		27.5	%		555,260		29.7	%		540,835		28.0	%
Fuel		38,275		6.8	%		54,559		9.4	%		125,764		6.7	%		180,846		9.3	%
Pharmacy		33,302		5.9	%		38,707		6.7	%		111,429		6.0	%		126,986		6.6	%
Other(3)		5,019		0.9	%		5,104		0.9	%		16,930		0.9	%		17,020		0.9	%
	$	560,744		100.0	%	$	580,741		100.0	%	$	1,869,505		100.0	%	$	1,933,480		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

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

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.

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 October 3, 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):

	October 3, 2015		December 27,2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,052	$	1,983
Long-term debt		669,303		649,097
Total carrying value of debt instruments		671,355		651,080
Fair value of debt instruments		672,386		656,305
Excess of fair value over book value	$	1,031	$	5,225

The fair values of the 2017 Notes and 2018 Notes, which are included in long-term debt as of December 27, 2014, and the 2018 Notes and 2022 Notes (see Note 6), which are included in long-term debt as of October 3, 2015, 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.

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 03, 2015	Nov. 09, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 03, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Entity Registrant Name	TOPS HOLDING II CORP
Entity Central Index Key	0001584701
Current Fiscal Year End Date	--12-27
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		126,559

XML

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

9 Months Ended

Oct. 03, 2015

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Sales Revenue by Type of Similar Product

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

	12-week periods ended										40-week periods ended
	October 3, 2015					October 4, 2014					October 3, 2015					October 4, 2014
			% of					% of					% of					% of
	Amount		Total			Amount		Total			Amount		Total			Amount		Total
Non-perishables(1)	$	321,794		57.4	%	$	322,403		55.5	%	$	1,060,122		56.7	%	$	1,067,793		55.2	%
Perishables(2)		162,354		29.0	%		159,968		27.5	%		555,260		29.7	%		540,835		28.0	%
Fuel		38,275		6.8	%		54,559		9.4	%		125,764		6.7	%		180,846		9.3	%
Pharmacy		33,302		5.9	%		38,707		6.7	%		111,429		6.0	%		126,986		6.6	%
Other(3)		5,019		0.9	%		5,104		0.9	%		16,930		0.9	%		17,020		0.9	%
	$	560,744		100.0	%	$	580,741		100.0	%	$	1,869,505		100.0	%	$	1,933,480		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 October 3, 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):

	October 3, 2015		December 27,2014
Carrying value of long-term debt:
Current portion of long-term debt	$	2,052	$	1,983
Long-term debt		669,303		649,097
Total carrying value of debt instruments		671,355		651,080
Fair value of debt instruments		672,386		656,305
Excess of fair value over book value	$	1,031	$	5,225

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Income Statement [Abstract]
Net sales	$ 560,744	$ 580,741	$ 1,869,505	$ 1,933,480
Cost of goods sold	(386,195)	(404,739)	(1,284,579)	(1,349,355)
Distribution costs	(9,125)	(10,969)	(34,948)	(37,801)
Gross profit	165,424	165,033	549,978	546,324
Operating expenses:
Wages, salaries and benefits	(80,354)	(80,305)	(272,581)	(267,505)
Selling and general expenses	(27,459)	(27,471)	(91,809)	(96,938)
Administrative expenses (inclusive of share-based compensation expense of $53, $52, $177 and $113)	(17,842)	(16,302)	(58,844)	(51,285)
Rent expense, net	(6,292)	(6,233)	(20,863)	(20,506)
Depreciation and amortization	(14,719)	(14,045)	(47,891)	(45,512)
Advertising	(4,901)	(4,280)	(16,590)	(16,042)
Gain on sale of assets (Note 8)			11,014
Total operating expenses	(151,567)	(148,636)	(497,564)	(497,788)
Operating income	13,857	16,397	52,414	48,536
Loss on debt extinguishment			(34,503)
Interest expense, net	(18,619)	(18,625)	(63,404)	(63,023)
Loss before income taxes	(4,762)	(2,228)	(45,493)	(14,487)
Income tax (expense) benefit	(400)	795	(1,342)	4,461
Net loss	(5,162)	(1,433)	(46,835)	(10,026)
Other comprehensive (loss) income		(13)		435
Comprehensive loss	$ (5,162)	$ (1,446)	$ (46,835)	$ (9,591)

XML

Debt

9 Months Ended

Oct. 03, 2015

Debt Disclosure [Abstract]

Debt

6. DEBT

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

	October 3, 2015			December 27,2014
2022 Notes	$	560,000		$	—
2018 Notes		90,000			150,000
2017 Notes		—			460,000
Discount on 2018 Notes		(532	)		(1,100	)
Deferred financing fees		(13,347	)		(15,033	)
2017 ABL Facility		31,500			52,000
Other loans		3,734			5,213
Total debt		671,355			651,080
Current portion		(2,052	)		(1,983	)
Total long-term debt	$	669,303		$	649,097

On June 10, 2015, Holding I and Tops Markets II Corporation (collectively, the “Issuers”) issued $560.0 million in aggregate principal amount of senior secured notes due in 2022, bearing annual interest at a rate of 8.00% (the “2022 Notes”).  The proceeds from the 2022 Notes were used to fund a tender offer for, and redeem the balance of, the previously outstanding $460.0 million of senior secured notes issued by Holding I, Tops Markets and Tops Markets II Corporation (the “2017 Notes”) and to fund a partial tender offer for $60.0 million of the $150.0 million outstanding 8.75%/9.50% senior unsecured notes issued by Tops Holding II (the “2018 Notes”), including tender and redemption premiums of $23.0 million and $1.2 million, respectively, which have been recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The proceeds were also used to pay accrued and unpaid interest related to the tendered and redeemed notes and fees and expenses related to the issuance of the 2022 Notes.  The 2022 Notes mature on June 15, 2022 and require semi-annual interest payments on June 15 and December 15, beginning December 15, 2015.  The 2022 Notes are redeemable, in whole or in part, at any time on or after June 15, 2018 at specified redemption prices.  Prior to June 15, 2018, the Company may redeem the 2022 Notes in whole or in part, at a specified “make-whole” premium.

The 2022 Notes are collateralized by (i) first priority security interests, subject to certain exceptions and permitted liens, in the stock held by the Issuers and the guarantor subsidiaries, Tops Markets, 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 2022 Notes, equipment, intellectual property, and substantially all other assets of the Issuers and the Guarantors, other than those assets securing the Company’s asset-based revolving credit facility (the “2017 ABL Facility”) on a first priority basis (collectively, the “2022 Notes Priority Collateral”), and (ii) second priority security interests, subject to certain exceptions and permitted liens, in the assets of Holding II, 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”).

The 2022 Notes are guaranteed on a senior secured basis, jointly and severally, by each of the Guarantors and will in the future be guaranteed by certain of Holding I’s future domestic subsidiaries.  The 2022 Notes are also guaranteed on a senior unsecured basis by Holding II.

As discussed in Note 1, the Company adopted ASU No. 2015-03 and as a result now nets deferred financing costs against long-term debt in the Company’s condensed consolidated balance sheets.  This adoption resulted in the reclassification of unamortized deferred financing costs of $15.0 million from the line item “other assets” to the line item “long-term debt, net” in the Company’s condensed consolidated balance sheet as of December 27, 2014.  Costs associated with the 2022 Notes of $10.8 million were capitalized and are being amortized over the term of the 2022 Notes using the effective interest method.  Unamortized deferred financing costs of $8.0 million related to the 2017 Notes and $1.9 million related to the redeemed portion of the 2018 Notes and $0.4 million of the unamortized discount on the 2018 Notes were written off and recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.

During the 12-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to the deferred financing costs was $0.5 million and $0.9 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, amortization expense related to deferred financing costs was $2.6 million and $3.0 million, respectively.  This amortization expense is included in interest expense in the condensed consolidated statements of comprehensive loss.  At October 3, 2015, long-term debt included deferred financing costs, net of accumulated amortization of $1.2 million, totaling $13.3 million.  At December 27, 2014, long-term debt included deferred financing costs, net of accumulated amortization of $7.3 million, totaling $15.0 million.

On May 15, 2013, Holding II issued $150.0 million of 2018 Notes.  As discussed above, on June 10, 2015, Holding II successfully tendered for and repurchased $60.0 million of 2018 Notes, resulting in a remaining outstanding principal amount of $90.0 million as of October 3, 2015.  If certain conditions are met, Holding II may be entitled to pay interest on the 2018 Notes by increasing the principal of the notes or by issuing new notes as pay-in-kind interest.  This payment in kind interest would accrue at an annual rate of 9.50%.  The $148.5 million proceeds from the 2018 Notes issuance, net of a $1.5 million original issue discount, were used to pay a $141.9 million dividend to the Holding II shareholders.  In connection with the partial tender offer for the 2018 Notes completed on June 10, 2015, $0.4 million of the unamortized discount was written off and recorded within loss on debt extinguishment in the condensed consolidated statement of comprehensive loss during the 40-week period ended October 3, 2015.  The 2018 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 2022 Notes and the 2017 ABL Facility (see below), Holding I may make dividend payments to Holding II to fund the semi-annual interest payments for the 2018 Notes.  The 2018 Notes are redeemable, in whole or in part, at specified redemption prices.  

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 October 3, 2015, the unused availability under the 2017 ABL Facility was $54.9 million, after giving effect to the borrowing base calculation, $23.8 million of letters of credit outstanding and $31.5 million of 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 October 3, 2015 and December 27, 2014, the weighted average interest rates on borrowings under the 2017 ABL Facility were 2.56% 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 2022 Notes Priority Collateral.

The instruments governing the 2022 Notes, 2018 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.

XML

Capital Lease Obligations

9 Months Ended

Oct. 03, 2015

Leases [Abstract]

Capital Lease Obligations

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 2034, 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 October 3, 2015, future minimum lease rental payments applicable to non-cancelable capital lease obligations were as follows (dollars in thousands):

2015 (remaining period)	$	7,279
2016		31,155
2017		29,194
2018		25,416
2019		22,646
Thereafter		119,228
Total minimum lease payments		234,918
Less amounts representing interest		(153,299	)
Present value of net minimum lease payments		81,619
Less current obligations		(8,524	)
Long-term cash obligations		73,095
Non-cash obligations		67,370
Total long-term capital lease obligations	$	140,465

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 nine properties for cash proceeds of $12.6 million and $25.4 million during the 12-week and 40-week periods ended October 4, 2014, respectively.  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 of the Company 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 2018 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.

XML

Income Taxes (Tables)

9 Months Ended

Oct. 03, 2015

Income Tax Disclosure [Abstract]

Summary of Income Tax (Expense) Benefit

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

	12-week periods ended						40-week periods ended
	October 3,2015			October 4, 2014			October 3, 2015			October 4, 2014
Current	$	—		$	(23	)	$	(8	)	$	(41	)
Deferred		(400	)		818			(1,334	)		4,502
Total income tax (expense) benefit	$	(400	)	$	795		$	(1,342	)	$	4,461

XML

Goodwill and Intangible Assets, Net (Tables)

9 Months Ended

Oct. 03, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Changes in Goodwill

The following table summarizes the change in the Company’s goodwill balance during the 40-week period ended October 3, 2015 (dollars in thousands):

Balance - December 27, 2014	$	212,901
Adjustments		—
Balance - October 3, 2015	$	212,901

Summary of Intangible Assets, Net of Accumulated Amortization

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

	Gross					Net		Average
	Carrying		Accumulated			Carrying		Amortization
October 3, 2015	Amount		Amortization			Amount		Period
Tradename - indefinite	$	131,200	$	—		$	131,200	Indefinitelife
Customer relationships		29,200		(12,607	)		16,593		14.0
Favorable lease rights		21,550		(5,592	)		15,958		9.0
Franchise agreements		13,300		(3,445	)		9,855		14.0
Pharmacy scripts		2,800		(1,051	)		1,749		14.0
	$	198,050	$	(22,695	)	$	175,355		11.9

	Gross					Net
	Carrying		Accumulated			Carrying
December 27, 2014	Amount		Amortization			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 October 3, 2015, expected future amortization of intangible assets is as follows (dollars in thousands):

2015 (remaining period)	$	2,666
2016		8,181
2017		6,946
2018		5,907
2019		4,952
Thereafter		15,503

XML

Shareholders' Deficit

9 Months Ended

Oct. 03, 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 shares of common stock of Tops MBO Co from a former Company executive.  In addition, one outstanding share of common stock of Holding II was repurchased.

XML

Income Taxes

9 Months Ended

Oct. 03, 2015

Income Tax Disclosure [Abstract]

Income Taxes

7. INCOME TAXES

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

	12-week periods ended						40-week periods ended
	October 3,2015			October 4, 2014			October 3, 2015			October 4, 2014
Current	$	—		$	(23	)	$	(8	)	$	(41	)
Deferred		(400	)		818			(1,334	)		4,502
Total income tax (expense) benefit	$	(400	)	$	795		$	(1,342	)	$	4,461

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 12-week and 40-week periods ended October 3, 2015.  The income tax expense recognized for the 12-week and 40-week periods ended October 3, 2015 solely reflects the recognition of additional valuation allowance associated with the tax amortization of the Company’s indefinite-lived tradename and goodwill deferred tax liabilities.  During the 12-week and 40-week periods ended October 3, 2015, the effective tax rate would have been 39.3% and 39.1%, respectively, without the establishment of the valuation allowance for both periods.

The income tax benefit recognized during the 12-week and 40-week periods ended October 4, 2014 primarily reflects the loss before income taxes, net of the recognition of valuation allowance associated with the Company’s indefinite-lived tradename and goodwill deferred tax liabilities.  During the 12-week and 40-week periods ended October 4, 2014, the effective tax rate would have been 42.2% and 41.7%, respectively, without the establishment of the valuation allowance.

As of the beginning of Fiscal 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

9 Months Ended

Oct. 03, 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 40-week period ended October 3, 2015.

XML

Commitments and Contingencies

9 Months Ended

Oct. 03, 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 12-week periods ended October 3, 2015 and October 4, 2014, these rejected contributions totaled $1.2 million and $0.8 million, respectively.  During the 40-week periods ended October 3, 2015 and October 4, 2014, these rejected contributions totaled $3.6 million and $3.1 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.  During each of the 12-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $1.9 million.  During the 40-week periods ended October 3, 2015 and October 4, 2014, the monthly conditional payments of withdrawal liability totaled $5.8 million and $1.9 million, respectively.  These monthly conditional payments 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 $9.6 million as of October 3, 2015, have been recorded in accounts receivable, while the aggregate rejected contributions, totaling $7.8 million as of October 3, 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 resumed warehousing and transportation functions, while C&S continues 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.  As of 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.

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 this 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 related to some of its properties.  As the Company is unaware of environmental issues that are expected to materially impact the Company’s consolidated financial statements as a whole, no amounts were accrued as of October 3, 2015 or December 27, 2014.

Collective Bargaining Agreements

The Company employs approximately 14,450 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% of these associates are members of Teamsters Local 264, who work in 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 April 2017 and October 2018.  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 any 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 October 3, 2015 or December 27, 2014.

XML

Capital Lease Obligations - Schedule of Future Minimum Lease Rental Payments for Capital Lease Obligations (Detail) - USD ($) $ in Thousands	Oct. 03, 2015	Dec. 27, 2014
Leases [Abstract]
2015 (remaining period)	$ 7,279
2016	31,155
2017	29,194
2018	25,416
2019	22,646
Thereafter	119,228
Total minimum lease payments	234,918
Less amounts representing interest	(153,299)
Present value of net minimum lease payments	81,619
Less current obligations	(8,524)	$ (8,653)
Long-term cash obligations	73,095
Non-cash obligations	67,370
Total long-term capital lease obligations	$ 140,465	$ 140,315

XML

Capital Lease Obligations (Tables)

9 Months Ended

Oct. 03, 2015

Leases [Abstract]

Schedule of Future Minimum Lease Rental Payments for Capital Lease Obligations

As of October 3, 2015, future minimum lease rental payments applicable to non-cancelable capital lease obligations were as follows (dollars in thousands):

2015 (remaining period)	$	7,279
2016		31,155
2017		29,194
2018		25,416
2019		22,646
Thereafter		119,228
Total minimum lease payments		234,918
Less amounts representing interest		(153,299	)
Present value of net minimum lease payments		81,619
Less current obligations		(8,524	)
Long-term cash obligations		73,095
Non-cash obligations		67,370
Total long-term capital lease obligations	$	140,465

XML

The Company, Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Carrying and Estimated Values of Debt Instruments (Detail) - USD ($) $ in Thousands	Oct. 03, 2015	Dec. 27, 2014
Carrying value of long-term debt:
Current portion of long-term debt	$ 2,052	$ 1,983
Long-term debt	669,303	649,097
Total carrying value of debt instruments	671,355	651,080
Fair value of debt instruments	672,386	656,305
Excess of fair value over book value	$ 1,031	$ 5,225

XML

Commitments and Contingencies - Additional Information (Detail)			3 Months Ended		9 Months Ended		10 Months Ended
	May. 27, 2014 USD ($)	Sep. 24, 2012 Store	Oct. 03, 2015 USD ($) EMP	Oct. 04, 2014 USD ($)	Oct. 03, 2015 USD ($) EMP Agreement	Oct. 04, 2014 USD ($)	Oct. 03, 2015 USD ($) EMP	Oct. 04, 2014 USD ($)	Dec. 27, 2014 USD ($)
Commitments Contingencies And Litigation [Line Items]
Payment of withdrawal liability			$ 1,900,000	$ 1,900,000			$ 5,800,000	$ 1,900,000
Number of supermarkets acquired | Store		21
Expiration date of supply agreement					Feb. 28, 2017
Number of employed associates | EMP			14,450		14,450		14,450
Percentage of associates engaged in various unions					83.00%
Number of collective bargaining agreements | Agreement					5
Pending Litigation [Member]
Commitments Contingencies And Litigation [Line Items]
Accrued amount related to legal proceedings			$ 0		$ 0		$ 0		$ 0
Teamster Local 264 [Member]
Commitments Contingencies And Litigation [Line Items]
Percentage of members working in distribution facilities			4.00%		4.00%		4.00%
Number of collective bargaining agreements | Agreement					3
Expiration date of collective bargaining agreements					2019-08
Local One Collective Bargaining Arrangement [Member] | Five Collective Bargaining Agreements [Member] | Minimum [Member]
Commitments Contingencies And Litigation [Line Items]
Expiration date of collective bargaining agreements					2017-04
Local One Collective Bargaining Arrangement [Member] | Five Collective Bargaining Agreements [Member] | Maximum [Member]
Commitments Contingencies And Litigation [Line Items]
Expiration date of collective bargaining agreements					2018-10
Non Local Collective Bargaining Arrangement One [Member]
Commitments Contingencies And Litigation [Line Items]
Expiration date of collective bargaining agreements					2016-04
Non Local Collective Bargaining Arrangement Two [Member]
Commitments Contingencies And Litigation [Line Items]
Expiration date of collective bargaining agreements					2018-02
Supplemental Supply Agreement [Member]
Commitments Contingencies And Litigation [Line Items]
Agreement expiration date		Sep. 23, 2022
Branded Prescription Drugs [Member]
Commitments Contingencies And Litigation [Line Items]
Minimum purchase requirement					95.00%
Generic Pharmaceutical Products [Member]
Commitments Contingencies And Litigation [Line Items]
Minimum purchase requirement					95.00%
Accrued Expenses and Other Current Liabilities [Member]
Commitments Contingencies And Litigation [Line Items]
Multiemployer pension plan rejected contributions			$ 7,800,000		$ 7,800,000		$ 7,800,000
Accounts Receivable [Member]
Commitments Contingencies And Litigation [Line Items]
Payment of withdrawal liability			9,600,000		9,600,000		$ 9,600,000
Multiemployer Plans, Pension [Member]
Commitments Contingencies And Litigation [Line Items]
Multiemployer pension plan rejected contributions			$ 1,200,000	$ 800,000	$ 3,600,000	$ 3,100,000
Liability estimate due to withdrawal from fund	$ 183,700,000
Contribution payable period	240 months
Monthly installment amount	$ 641,514

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Income Statement [Abstract]
Share-based compensation expense included in administrative expenses	$ 53	$ 52	$ 177	$ 113

XML

Accrued Expenses and Other Current Liabilities

9 Months Ended

Oct. 03, 2015

Accrued Liabilities And Other Liabilities [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):

	October 3, 2015		December 27, 2014
Wages, taxes and benefits	$	21,641	$	18,951
Interest payable		16,624		2,269
Union medical, pension and 401(k)		14,116		8,985
Lottery		11,563		10,954
Self-insurance reserves		6,491		6,130
Professional and legal fees		4,238		3,170
Gift cards		3,238		8,974
Sales and use tax		2,726		596
Property and equipment expenditures		2,661		3,383
Utilities		2,520		3,383
Money orders		2,366		887
Repairs and maintenance		2,014		2,212
Other		14,034		12,216
	$	104,232	$	82,110

XML

Business Acquisitions - Additional Information (Detail) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	9 Months Ended
	Dec. 01, 2013	Dec. 28, 2013	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Business Acquisition [Line Items]
Increases of depreciation and amortization expense				$ 57,179	$ 53,322
Change in net loss			$ 500		200
Change in Useful Life of Property and Equipment [Member]
Business Acquisition [Line Items]
Increases of depreciation and amortization expense			100		500
Change of income tax benefit			$ 400		(300)
Management Purchase [Member]
Business Acquisition [Line Items]
Transaction fees	$ 15,800	$ 600			$ 15,200
Cash consideration, businesses acquisition	$ 20,900

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Jan. 01, 2015	Oct. 03, 2015	Oct. 04, 2014	Oct. 03, 2015	Oct. 04, 2014
Income Taxes [Line Items]
Effective income tax rate without adjustment valuation allowance		39.30%	42.20%	39.10%	41.70%
Expiration dates for operating losses	Jan. 01, 2026
United States Federal Tax [Member]
Income Taxes [Line Items]
Operating loss carryforwards net	$ 45.7
Federal tax credits	4.6
State and Local Jurisdiction [Member]
Income Taxes [Line Items]
Operating loss carryforwards net	$ 41.9

XML

Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Oct. 03, 2015

Accrued Liabilities And Other Liabilities [Abstract]

Summary of Accrued Expenses and Other Current Liabilities

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

	October 3, 2015		December 27, 2014
Wages, taxes and benefits	$	21,641	$	18,951
Interest payable		16,624		2,269
Union medical, pension and 401(k)		14,116		8,985
Lottery		11,563		10,954
Self-insurance reserves		6,491		6,130
Professional and legal fees		4,238		3,170
Gift cards		3,238		8,974
Sales and use tax		2,726		596
Property and equipment expenditures		2,661		3,383
Utilities		2,520		3,383
Money orders		2,366		887
Repairs and maintenance		2,014		2,212
Other		14,034		12,216
	$	104,232	$	82,110