<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
/x/ OF THE SECURITIES EXCHANGE ACT OF 1934
For the forty weeks ended October 5, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
/ / OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-785
NASH-FINCH COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 410431960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7600 France Ave. South, P. O. BOX 355
Minneapolis, Minnesota 55440-0355
(Address of principal executive offices) (Zip Code)
(612) 832-0534
(Registrant's telephone number including area code)
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
----- ----
Number of shares of common stock outstanding at November 18, 1996:
11,265,253 SHARES
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the forty week interim period beginning December 31,
1995, through October 5, 1996.
The accompanying financial information has been prepared in conformity
with generally accepted accounting principles and practices, and methods of
applying accounting principles and practices, (including consolidation
practices) as reflected in the financial information included in the
Company's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission for the preceding fiscal year. The financial statements included
in this quarterly report include all adjustments which are, in the opinion of
management, necessary to a fair presentation of the Company's financial
position and results of operations for the interim period.
The information contained herein has not been audited by independent
certified public accountants and is subject to any adjustments which may
develop in connection with the annual audit of its accounts by Ernst & Young
LLP, the Company's independent auditors.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Sixteen Weeks Ended Forty Weeks Ended
------------------------- -------------------------
October 5, October 7, October 5, October 7,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 984,799 898,104 2,384,089 2,175,709
Other revenues 19,068 20,721 39,514 43,228
---------- --------- --------- ---------
Total revenues 1,003,867 918,825 2,423,603 2,218,937
Cost and Expenses:
Cost of sales 869,669 785,623 2,098,129 1,895,516
Selling, general and administrative
and other operating expenses 108,738 112,558 264,259 269,267
Depreciation and amortization 10,070 9,024 24,870 22,594
Interest expense 3,969 3,129 9,972 8,715
---------- --------- --------- ---------
Total costs and expenses 992,446 910,334 2,397,230 2,196,092
Earnings before income taxes 11,421 8,491 26,373 22,845
Income taxes 4,625 3,439 10,681 9,252
---------- --------- --------- ---------
Net earnings $ 6,796 5,052 15,692 13,593
---------- --------- --------- ---------
---------- --------- --------- ---------
Weighted average number of
common shares outstanding 11,121 10,875 10,992 10,875
---------- --------- --------- ---------
---------- --------- --------- ---------
Earnings per share $ .61 .46 1.43 1.25
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
- ----------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
October 5, December 30,
ASSETS 1996 1995
- ------ ----------- ------------
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 1,005 26,024
Accounts and notes receivable, net 143,988 85,968
Inventories 226,092 183,957
Prepaid expenses 14,438 12,067
Deferred tax assets 4,768 3,674
--------- ---------
Total current assets 390,291 311,690
Investments in affiliates 9,156 8,421
Notes receivable, noncurrent 4,256 5,051
Property, plant and equipment:
Land 28,840 28,638
Buildings and improvements 114,458 110,887
Furniture, fixtures, and equipment 224,500 204,054
Leasehold improvements 27,452 25,786
Construction in progress 13,068 6,538
Assets under capitalized leases 12,449 12,923
--------- ---------
420,767 388,826
Less accumulated depreciation and amortization (221,954) (210,787)
--------- ---------
Net property, plant and equipment 198,813 178,039
Intangible assets, net 47,501 6,282
Deferred tax asset - net 2,973 2,835
Other assets 2,030 1,942
--------- ---------
Total assets $ 655,020 514,260
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Outstanding checks $ 12,965 28,998
Current maturities of long-term debt and capitalized lease obligations 7,304 14,701
Accounts payable 187,031 127,592
Accrued expenses 36,832 31,745
Income taxes 4,288 4,652
--------- ---------
Total current liabilities 248,420 207,688
Long-term debt 156,185 71,030
Capitalized lease obligations 9,762 10,158
Deferred compensation 7,320 7,625
Other 2,488 2,446
Stockholders' equity:
Preferred stock - no par value
Authorized 500 shares; none issued -
Common stock of $1.66 2/3 par value
Authorized 25,000 shares, issued 11,574 shares in 1996 and
11,224 in 1995 19,290 18,706
Additional paid-in capital 16,802 12,013
Foreign currency translation adjustment - net of a $633
deferred tax benefit (950) (950)
Restricted stock (506) -
Retained earnings 198,332 188,578
--------- ---------
232,968 218,347
Less cost of 309 and 346 shares of common stock in treasury,
respectively. (2,123) (3,034)
--------- ---------
Total stockholders' equity 230,845 215,313
--------- ---------
Total liabilities and stockholders' equity $ 655,020 514,260
--------- ---------
--------- ---------
</TABLE>
- ------------------------------------------------------------------
See accompanying notes to consolidated financial statements
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Forty Weeks Ended
-----------------------
October 5, October 7,
1996 1995
---------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 15,692 13,593
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 24,870 22,594
Provision for bad debts 1,092 2,881
Provision for losses on closed lease locations (284) (44)
Deferred income taxes (1,126) (1,882)
Deferred compensation (305) (806)
Earnings of equity investments (735) (879)
Other 306 208
Changes in operating assets and liabilities:
Accounts and notes receivable (15,680) 31
Inventories (13,181) (8,504)
Prepaid expenses (1,959) (2,782)
Accounts payable and outstanding checks 2,593 27,702
Accrued expenses 4,591 6,301
Income taxes (364) 3,508
---------- ----------
Net cash provided by operating activities 15,510 61,921
---------- ----------
Investing activities:
Dividends received - 890
Disposal of property, plant and equipment 6,853 5,286
Additions to property, plant and equipment
excluding capital leases (35,004) (22,211)
Businesses acquired (88,562) -
Loans sold, including current portion 3,402 13,744
Short-term investments - (5,969)
Investment in an affiliate - (1,179)
Loans to customers (2,844) (6,883)
Payments from customers on loans 5,016 6,851
Other (295) (112)
---------- ----------
Net cash used for investing activities (111,434) (9,583)
---------- ----------
Financing activities:
Proceeds from long-term debt 30,000 -
Proceeds from revolving debt 60,811 -
Dividends paid (5,938) (5,872)
Payments of short-term debt - (41,100)
Payments of long-term debt (13,653) (4,957)
Payments of capitalized lease obligations (406) (433)
Other 91 17
---------- ----------
Net cash provided by (used for) financing activities 70,905 (52,345)
---------- ----------
Net decrease in cash and cash equivalents $ (25,019) (7)
---------- ----------
---------- ----------
</TABLE>
- -----------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended October 5, 1996
December 30, 1995 and December 31, 1994
(In thousands, except per share amounts) Foreign
Common stock Additional currency Treasury stock Total
---------------- paid-in Retained translation Restricted --------------- stockholders'
Shares Amount capital earnings adjustment stock Shares Amount equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 11,224 $ 18,706 11,954 171,670 - - (351) $ (3,066) 199,264
Net earnings - - - 15,480 - - - - 15,480
Dividend declared of $.73 per share - - - (7,938) - - - - (7,938)
Treasury stock issued upon exercise
of options - - 23 - - - 2 12 35
Foreign currency translation adjustment
- net of a $381 deferred tax benefit - - - - (572) - - - (572)
------- -------- ------ ------- ------ ------- ------- ------- --------
Balance at December 31, 1994 11,224 18,706 11,977 179,212 (572) - (349) (3,054) 206,269
Net earnings - - - 17,414 - - - - 17,414
Dividend declared of $.74 per share - - - (8,048) - - - - (8,048)
Treasury stock issued upon exercise
of options - - 36 - - - 3 20 56
Foreign currency translation adjustment
- net of a $252 deferred tax benefit - - - - (378) - - - (378)
------- -------- ------ ------- ------ ------- ------- ------- --------
Balance at December 30, 1995 11,224 18,706 12,013 188,578 (950) - (346) (3,034) 215,313
Net earnings - - - 15,692 - - - - 15,692
Dividend declared of $.54 per share - - - (5,938) - - - - (5,938)
Shares issued in connection with
acquisition of a business 350 584 5,064 - - - - - 5,648
Treasury stock issued upon exercise
of options - - 33 - - - 4 36 69
Issuance of restricted stock - - (308) - - (524) 40 995 163
Amortized compensation under
restricted stock plan - - - - - 18 - - 18
Treasury stock purchased - - - - - - (7) (120) (120)
------- -------- ------ ------- ------ ------- ------- ------- --------
Balance at October 5, 1996 (unaudited) 11,574 $ 19,290 16,802 198,332 (950) (506) (309) $(2,123) 230,845
------- -------- ------ ------- ------ ------- ------- ------- --------
------- -------- ------ ------- ------ ------- ------- ------- --------
</TABLE>
- ------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 5, 1996
NOTE 1
The accompanying financial statements include all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of the Company and its subsidiaries at October 5, 1996 and December
30, 1995, and the results of operations for the 16 and 40-weeks ending
October 5, 1996 and October 7, 1995, and the changes in cash flows for the
40-week period ending October 5, 1996 and October 7, 1995, respectively. All
material intercompany accounts and transactions have been eliminated in the
consolidated financial statements. Results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the full year.
NOTE 2
The Company uses the LIFO method for valuation of a substantial portion
of inventories. If the FIFO method had been used, inventories would have
been approximately $41.1 million and $40.0 million higher at October 5, 1996
and at December 30, 1995, respectively.
NOTE 3
Earnings per share are computed by dividing net earnings by the weighted
average number of common shares outstanding during each period presented.
Options granted under the Company's qualified stock plan are considered
common stock equivalents for the purpose of earnings per share data, but have
been excluded from the computation since the dilutive effect is not material.
NOTE 4
On September 8, 1995, the Company entered into an agreement with a
financial institution whereby the Company sold $13.7 million in customer
notes, and can continue to sell on an ongoing basis additional customer
notes. During the quarter, an additional $3.4 million in notes were sold, and
at October 5, 1996, remaining balances on all notes receivable sold with
recourse was $15.4 million.
NOTE 5
On January 2, 1996, the Company acquired substantially all of the
business and assets of Military Distributors of Virginia, Inc., ("MDV")
located in Norfolk, Virginia for approximately $56.0 million in cash and the
assumption of certain liabilities totaling approximately $54.0 million. MDV
is a major distributor
<PAGE>
of grocery products to military commissaries in the eastern United States and
Europe.
The purchase price exceeded the fair value of the net assets acquired by
approximately $43 million. The resulting goodwill is being amortized on a
straight line basis over 15 years.
The following unaudited pro forma summary presents information as if the
acquisition had occurred at the beginning of fiscal 1995. It is based on
historical information and does not necessarily reflect results that would
have occurred had the acquisition been made as of that date or results which
may occur in the future (in thousands except per share amounts).
Forty Weeks Ended
----------------------------
October 5, October 7,
1996 1995
------------ -----------
Net revenues $ 2,423,603 2,512,612
Earnings before income taxes 26,373 26,010
Net earnings 15,692 15,492
Earnings per share $ 1.43 1.42
NOTE 6
On February 29, 1996, certain members of management exercised rights to
purchase restricted stock from the Company at a 25% discount to fair market
value pursuant to grants awarded January 31, 1996 under the terms of a 1994
Stock Incentive Plan. The purchase required a minimum of 10% payment in cash
with the remaining balance evidenced by a 5-year promissory note to the
Company. At October 5, 1996, unearned compensation equivalent to the excess
of market value of the shares purchased over the price paid by the recipient
at the date of grant, and the unpaid balance of the promissory note have been
charged to stockholders' equity. Amortization of compensation expense for
the quarter was not significant.
NOTE 7
On August 5, 1996 the Company issued 350,261 shares of its common stock
in exchange for all of the outstanding stock of T. J. Morris Company ("T.J.
Morris") located in Statesboro, Georgia. The excess of purchase price over
fair value of the assets acquired resulted in goodwill of approximately $1.4
million. The goodwill is being amortized on a straight-line basis over 15
years.
NOTE 8
On October 9,1996 the Company commenced a cash tender offer for all of
the outstanding common shares of Super Food Services, Inc. ("Super Food") for
$15.50 per share. The tender offer is conditional, among other things upon
there being validly tendered
<PAGE>
and not withdrawn shares representing at least a majority of shares
outstanding. As of November 6, 1996, the expiration of the tender period,
10.6 million of the 11.0 million shares outstanding have been tendered. All
validly tendered shares have been accepted for payment beginning November 15,
1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues, for the 16-week third quarter and for the 40-weeks to
date of fiscal 1996, increased 9.3% and 9.2%, respectively, over the same
periods last year. The improvement is largely attributed to growth in
wholesale revenues resulting from the acquisitions of MDV and T.J. Morris
since the beginning of the year, and the addition of new independent retail
accounts. Wholesale segment revenues for the 40 weeks represented
approximately 71.2% of total revenues compared to 68.5% last year, reflecting
a continued expansion of wholesale business.
Overall, retail revenues declined during the quarter primarily as a
result of the sale or closing of six retail stores, offset partially by the
acquisition of two other stores. On a year to date basis, the Company has
sold three stores to an existing customer, closed seven unprofitable stores
and acquired four other stores in three separate transactions. Same store
sales increased .3% during the third quarter, and were 1.3% higher on a year
to date basis, compared to last year.
Gross margins were 13.4% for the quarter and year to date, compared to
14.5% and 14.6%, respectively, for the corresponding periods last year. The
decreases this year resulted from a greater proportion of wholesale revenues
which achieve lower gross margins than retail. Overall margins were also
negatively impacted by the sale of a subsidiary, Thomas & Howard of Hickory,
Inc. ("T&H"), a higher margin general merchandise and convenience store
distributor, and the acquisition of the lower margin military and
conventional wholesale volume of MDV and T.J. Morris. The Company has
continued to regionalize buying functions among warehouse groups to improve
operating efficiency and lower product costs which may favorably impact
margins. Retail segment margins improved during the quarter and year to
date as a result of an increased distribution of sales from higher margin
perishable and specialty departments and the availability of greater vendor
allowances at store level. Margins were also affected by a LIFO charge of
$615,000 for the quarter, compared to $545,000 in the same period last year.
On a year to date basis, the LIFO charge is $865,000 compared to $425,000
last year.
Operating expenses as a percent of total revenues were 10.8% for the
quarter compared to 12.3% for the same period last year. On a year to date
basis, operating expenses were 10.9% this year compared to 12.1% in 1995.
Expense levels declined as a percent of total revenues due to the growing
proportion of wholesale revenues which typically operate at lower expense levels
than retail. In addition, operating expenses of the newly acquired MDV and T.J.
Morris wholesale business are lower, as a percent of revenues, than those of the
divested T&H operations. Incremental
<PAGE>
wholesale volume from new independent retail accounts continues to result in
productivity gains at certain distribution facilities. Also, a reduction in
retail related advertising and promotional activities contributed to lower
expense levels for the quarter. Partially offsetting these expense reductions
were increased costs associated with the design and development of
client/server based computer systems and software. These costs are expected
to continue for the remainder of fiscal 1996 and into 1997 as development
continues and an implementation process begins.
Depreciation and amortization expense increased 11.6% and 10.1% for the
quarter and year to date, respectively, compared to last year. The increase
was primarily due to the amortization of goodwill associated with the MDV
acquisition of $1.0 million for the quarter and $2.4 million for the year to
date. Partially offsetting these costs were lower depreciation expenses
resulting from the divestiture of several retail stores and T&H since the
prior year quarter.
Interest expense increased 26.8% and 14.4% for the third quarter and year
to date, respectively, compared to the same periods last year. The increase
is attributed to higher average borrowing levels, due to the acquisition of
MDV, and less favorable borrowing rates than were available last year.
Interest expense as a percent of revenues for the quarter and year to date
was .40% and .41%, respectively, compared to .34% and .39%, respectively,
last year.
Income tax expense increased due to higher pretax earnings. The
effective tax rate was 40.5%, unchanged from the comparable quarter and year
to date last year.
Net earnings for the third quarter and year to date increased 32.6% and
15.4%, respectively, compared to last year. The earnings improvement is
attributed to each segment of the company's operations; in particular, the
wholesale which benefited from the acquisitions of MDV and T.J. Morris, and
new independent retail volume the Company has been servicing since last year.
Retail operations also showed improvement for the quarter as did Nash
DeCamp, the Company's produce marketing subsidiary, which was favorably
affected by strong market conditions for its domestically grown products.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements and certain capital expenditures continue to
be funded principally from internally generated funds. However, the Company
may use short and long-term debt to supplement the financing of major capital
projects and acquisitions.
During fiscal 1996, the Company financed an $87.8 million cash outlay
related to the acquisition of MDV and the purchase of three retail stores.
Sources of funding were cash and cash equivalents generated from the sale of T&H
in December 1995,
<PAGE>
supplemented by borrowings under a $100.0 million revolving credit facility.
Cash provided from operations for the forty-week period was $15.5 million
compared to $61.9 million last year. The decrease was due primarily to
changes in the composition of working capital, particularly accounts
receivables and inventories which relate to the addition of new independent
accounts and the additional volume generated by MDV.
Also, the Company finalized an agreement to authorize the issuance and
sale of 7.13% Senior Notes due October 1, 2011, to several insurance
companies, in an aggregate principal amount of $30.0 million. Proceeds from
the issue were used to pay down a portion of a variable rate revolving credit
facility.
On August 5, 1996, the Company completed the acquisition of T. J. Morris
Company, located in Statesboro, Georgia. Under terms of the transaction, the
Company acquired all of the outstanding stock of Morris in exchange for
approximately 350,000 shares of its common stock.
On October 9,1996, under terms of a merger agreement, the Company
commenced a cash tender offer for all of the outstanding shares,
approximately 11.0 million, of Super Food common stock for $15.50 per share.
The company has negotiated a $500 million senior unsecured revolving credit
facility, with a scheduled partial reduction in two years, and the remaining
balance maturing five years from closing, to finance the tender offer as well
as to refinance its current credit facilities.
The Company believes it will continue to have adequate access to
short-term and long-term credit necessary to meet its needs for growth and
expansion in the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, 4, and 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
10.1 Agreement and Plan of Merger dated as of October 8, 1996 among
the Company, NFC Acquisition Corporation, and Super Food Services,
Inc.
10.2 Form of Credit Agreement among the Company, NFC Acquisition
Corporation, Harris Trust and Savings Bank as the Administrative
Agent, and Bank of Montreal and PNC Bank, N.A. as Co-Syndication
Agents.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASH-FINCH COMPANY
Registrant
Date:November 19, 1996 By /s/ Alfred N. Flaten
--------------------------------------
Alfred N. Flaten
President and Chief Executive Officer
By /s/ John R. Scherer
--------------------------------------
John R. Scherer
Chief Financial Officer
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
FOR THE FORTY WEEKS ENDING OCTOBER 5, 1996
ITEM NO. ITEM METHOD OF FILING
- -------- ---- ----------------
10.1 Agreement and Plan of Merger Incorporated by Reference to
dated as of October 8, 1996 Exhibit (c)(1) to the Company's
among the Company, NFC Schedule 14D-1 and Schedule 13D
Acquisition Corporation, and dated October 8, 1996 (File
Super Food Services, Inc. No. 005-13346).
10.2 Form of Credit Agreement among Incorporated by Reference to
the Company, NFC Acquisition Exhibit (b)(1) to the Company's
Corporation, Harris Trust and Schedule 14D-1 and Schedule 13D
Savings as the Administrative dated October 8, 1996 (File
Agent, and Bank of Montreal No. 005-13346).
and PNC Bank, N.A. as
Co-Syndication Agents.
27.1 Financial Data Schedule Filed herewith.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> OCT-5-1996
<CASH> 1,005
<SECURITIES> 0
<RECEIVABLES> 144,804
<ALLOWANCES> 816
<INVENTORY> 226,092
<CURRENT-ASSETS> 390,291
<PP&E> 420,767
<DEPRECIATION> 221,954
<TOTAL-ASSETS> 655,020
<CURRENT-LIABILITIES> 248,420
<BONDS> 156,185
0
0
<COMMON> 19,290
<OTHER-SE> 211,555
<TOTAL-LIABILITY-AND-EQUITY> 655,020
<SALES> 2,384,089
<TOTAL-REVENUES> 2,423,603
<CGS> 2,098,129
<TOTAL-COSTS> 288,037
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,092
<INTEREST-EXPENSE> 9,972
<INCOME-PRETAX> 26,373
<INCOME-TAX> 10,681
<INCOME-CONTINUING> 15,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,692
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
