<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 twenty-four weeks ended June 15, 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 July 25, 1996:
10,914,657 shares
-----------------
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the twenty-four week interim period beginning December
31, 1995, through June 15, 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>
Twelve Weeks Ended Twenty-four Weeks Ended
-------------------------- --------------------------
June 15, June 17, June 15, June 17,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 723,806 663,708 1,399,290 1,277,606
Other revenues 11,436 12,806 20,446 22,506
----------- ----------- ----------- -----------
Total revenues 735,242 676,514 1,419,736 1,300,112
Cost and Expenses:
Cost of sales 635,315 575,582 1,228,460 1,109,894
Selling, general and administrative 79,041 81,671 155,521 156,709
and other operating expenses
Depreciation and amortization 7,553 6,780 14,800 13,570
Interest expense 3,080 2,646 6,003 5,585
----------- ----------- ----------- -----------
Total costs and expenses 724,989 666,679 1,404,784 1,285,758
Earnings before income taxes 10,253 9,835 14,952 14,354
Income taxes 4,153 3,983 6,056 5,813
----------- ----------- ----------- -----------
Net earnings $ 6,100 5,852 8,896 8,541
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding 10,921 10,875 10,905 10,875
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share $ 0.56 0.54 0.82 0.79
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
___________________________________________________________________
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 15, December 30,
ASSETS 1996 1995
--------- ------------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,456 26,024
Accounts and notes receivable, net 142,333 85,968
Inventories 196,042 183,957
Prepaid expenses 15,760 12,067
Deferred tax assets 4,536 3,674
--------- ---------
Total current assets 360,127 311,690
Investments in affiliates 8,772 8,421
Notes receivable, noncurrent 4,726 5,051
Property, plant and equipment:
Land 29,169 28,638
Buildings and improvements 113,517 110,887
Furniture, fixtures, and equipment 217,015 204,054
Leasehold improvements 26,995 25,786
Construction in progress 5,808 6,538
Assets under capitalized leases 12,449 12,923
--------- ---------
404,953 388,826
Less accumulated depreciation and amortization (214,327) (210,787)
--------- ---------
Net property, plant and equipment 190,626 178,039
Intangible assets, net 47,207 6,282
Deferred tax asset - net 2,930 2,835
Other assets 2,121 1,942
--------- ---------
Total assets $ 616,509 514,260
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks, net of cash in banks $ 16,700 28,998
Current maturities of long-term debt and
capitalized lease obligations 17,314 14,701
Accounts payable 156,188 127,592
Accrued expenses 37,819 31,745
Income taxes 6,977 4,652
--------- ---------
Total current liabilities 234,998 207,688
Long-term debt 141,378 71,030
Capitalized lease obligations 9,911 10,158
Deferred compensation 7,445 7,625
Other 2,374 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 11,224
shares in 1996 and 1995 18,706 18,706
Additional paid-in capital 11,735 12,013
Foreign currency translation adjustment -
net of a $633 deferred tax benefit (950) (950)
Restricted stock (515) -
Retained earnings 193,551 188,578
--------- ---------
222,527 218,347
Less cost of 309 and 346 shares of common
stock in treasury, respectively. (2,124) (3,034)
--------- ---------
Total stockholders' equity 220,403 215,313
--------- ---------
Total liabilities and stockholders' equity $ 616,509 514,260
--------- ---------
--------- ---------
</TABLE>
____________________________________________________________________
See accompanying notes to consolidated financial statements
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
-----------------------------------
June 15, June 17,
1996 1995
---------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 8,896 8,541
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,800 13,570
Provision for bad debts 702 1,429
Provision for losses on closed lease locations (172) 31
Deferred income taxes (957) (286)
Deferred compensation (180) (552)
Earnings of equity investments (356) (463)
Other 128 151
Changes in operating assets and liabilities:
Accounts and notes receivable (14,150) (2,071)
Inventories 8,469 9,601
Prepaid expenses (3,537) (7,000)
Accounts payable 1,958 3,125
Accrued expenses 5,936 5,887
Income taxes 2,325 3,704
---------- ----------
Net cash provided by operating activities 23,862 35,667
---------- ----------
Investing activities:
Dividends received - 890
Disposal of property, plant and equipment 3,680 1,980
Additions to property, plant and equipment
excluding capital leases (20,782) (8,560)
Business acquired (87,823) -
Investment in an affiliate - (1,179)
Loans to customers (1,766) (4,765)
Payments from customers on loans 2,563 3,961
Other (274) (72)
---------- ----------
Net cash used for investing activities (104,402) (7,745)
---------- ----------
Financing activities:
Proceeds from long-term debt 30,000 -
Proceeds from revolving debt 44,700 -
Dividends paid (3,923) (3,915)
Payments of short-term debt - (5,700)
Payments of long-term debt (2,345) (3,389)
Payments of capitalized lease obligations (252) (270)
Other 87 7
---------- ----------
Net cash provided by (used for) financing activities 68,267 (13,267)
---------- ----------
Net (decrease) increase in cash $ (12,273) 14,655
---------- ----------
---------- ----------
</TABLE>
- ---------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Fiscal period ended June 15, 1996
December 30, 1995 and December 31, 1994 Foreign Total
(In thousands, except per share amounts) Additional currency Treasury stock stock-
Common stock paid-in Retained translation Restricted ------------------ holders'
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 - - - 8,896 - - - - 8,896
Dividend declared of $.36 per share - - - (3,923) - - - - (3,923)
Treasury stock issued upon exercise of
options - - 30 - - - 4 35 65
Issuance of restricted stock (308) - - (524) 40 995 163
Amortized compensation under restricted
stock plan - - - - - 9 - - 9
Treasury stock purchased - - - - - - (7) (120) (120)
------ ------ ------ ------ ------- ------ ----- ------ ------
Balance at June 15, 1996 11,224 $18,706 11,735 193,551 (950) (515) (309) $(2,124) 220,403
------ ------ ------ ------ ------- ------ ----- ------ ------
------ ------ ------ ------ ------- ------ ----- ------ ------
</TABLE>
____________________________________________________________________
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 15, 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 June 15, 1996 and December 30, 1995, and the
results of operations for the 12 and 24-weeks ending June 15, 1996 and June 17,
1995, and the changes in cash flows for the 24-week period ending June 15, 1996
and June 17, 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 $40.3 million and $40.0 million higher at June 15, 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. The
Company is responsible for collection of the notes and remits the principal plus
a floating rate of interest to the purchaser on a monthly basis. Proceeds from
the sale of the notes receivable were used to pay off short-term bank debt. At
June 15, 1996, remaining balances on all notes receivable sold with recourse was
$13.2 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).
Twenty-four Weeks Ended
--------------------------
June 15, June 17,
1996 1995
---------- ----------
Net revenues $1,419,736 1,485,506
Earnings before income taxes 14,952 16,464
Net earnings 8,896 9,807
Earnings per share $ .82 .91
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 June 15, 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the second quarter and year to date of fiscal 1996
increased 8.7% and 9.2%, respectively, over the same periods last year. The
improvement is largely attributed to growth in wholesale revenues resulting from
the acquisition of MDV at the beginning of the year and the addition of new
independent retail accounts. During the quarter and for the year to date,
wholesale segment revenues represented approximately 71% of total revenues
compared to 69% last year, reflecting a growing proportion of wholesale
business.
Overall, retail revenues increased for the quarter and year to date
resulting from the acquisition, in the first quarter of 1996, of two warehouse
type stores from an existing customer. Same store sales, however, declined 1.3%
during the second quarter, but were .3% higher on a year to date basis, compared
to last year.
Gross margins were 13.6% and 13.5% for the quarter and year to date,
respectively, compared to 14.9% and 14.6%, respectively, for the corresponding
period 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
distribution volume of MDV. The Company is continuing to regionalize buying
functions among warehouse groups to enhance operating efficiency and lower
product costs which may improve 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 $510,000 for the quarter, compared to credit of
$15,000 in the same period last year.
Operating expenses as a percent of total revenues were 10.8% for the
quarter compared to 12.1% for the same period last year. On a year to date
basis, operating expenses were 11.0% 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 military
distribution business are lower, as a percent of revenues, than those of the
divested T&H operations. Incremental 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 gains were increased costs associated with the design
and development of client/server
<PAGE>
based computer systems and software. These costs are expected to continue for
the remainder of fiscal 1996 and into 1997.
Depreciation and amortization expense increased 11.4% and 9.1% for the
quarter and year to date, respectively, compared to last year. The increase was
primarily due to the $.7 million for the quarter and $1.4 million for the year
to date in amortization of goodwill associated with the MDV acquisition.
Partially offsetting these costs were lower depreciation expenses resulting from
the sale or closing of several retail stores and T&H since the prior year
quarter.
Interest expense increased 16.4% and 7.5% for the second 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 both the quarter and year to date was .42%,
compared to .39% and .43%, respectively, last year.
Income tax expense increased due to higher pretax earnings. The effective
tax rate was 40.5%, unchanged from the comparable periods last year.
Net earnings for the second quarter and year to date increased 4.2%
compared to last year. The earnings improvement is attributed to wholesale
operations, in particular, the acquisition of MDV and new independent retail
volume the Company has been servicing since last year. Retail operations also
showed improvement for the quarter while Nash DeCamp, the Company's produce
marketing subsidiary, was adversely affected by poor overseas market conditions
for Chilean-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 the first half of fiscal 1996, the Company financed an $87.8
million cash outlay related to the acquisition of MDV and the purchase of two
retail stores. Sources of funding were cash and cash equivalents generated from
the sale of T&H in December 1995, supplemented by borrowings under a $100.0
million revolving credit facility.
Cash provided from operations for the twenty-four week period was $23.9
million compared to $35.7 million last year. The decrease was due primarily to
changes in the composition of working capital, particularly accounts
receivables which relate to the addition of new independent accounts and the
additional volume generated by MDV.
<PAGE>
During the second quarter, 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 June 5,1996, the Company entered into an agreement to acquire T. J.
Morris Company, located in Statesboro, Georgia. Under the agreement, the
Company will acquire all of the outstanding stock of Morris in exchange for its
common stock. The number of shares to be issued by the Company will not
materially increase the number of shares outstanding. The acquisition is
expected to be completed in the third quarter.
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:
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: July 30, 1996 By /s/ Alfred N. Flaten
----------------------------- ------------------------------------
Alfred N. Flaten
President and Chief Executive
Officer
By /s/ Lawrence A. Wojtasiak
------------------------------------
Lawrence A. Wojtasiak
Chief Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-15-1996
<CASH> 1,456
<SECURITIES> 0
<RECEIVABLES> 143,079
<ALLOWANCES> 746
<INVENTORY> 196,042
<CURRENT-ASSETS> 360,127
<PP&E> 404,953
<DEPRECIATION> (214,327)
<TOTAL-ASSETS> 616,509
<CURRENT-LIABILITIES> 234,998
<BONDS> 141,378
0
0
<COMMON> 18,706
<OTHER-SE> 201,697
<TOTAL-LIABILITY-AND-EQUITY> 616,509
<SALES> 1,399,290
<TOTAL-REVENUES> 1,419,736
<CGS> 1,228,460
<TOTAL-COSTS> 169,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 702
<INTEREST-EXPENSE> 6,003
<INCOME-PRETAX> 14,952
<INCOME-TAX> 6,056
<INCOME-CONTINUING> 8,896
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,896
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
