<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 TWELVE WEEKS ENDED MARCH 23, 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, Minneapolis Minnesota 55435
(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 May 3, 1996:
10,921,543 SHARES
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the twelve week interim period beginning December 31,
1995, through March 23, 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
------------------------
March 23, March 25,
1996 1995
--------- ---------
<S> <C> <C>
Revenues:
Net sales $ 675,484 613,898
Other revenues 9,010 9,700
--------- ---------
Total revenues 684,494 623,598
Cost and Expenses:
Cost of sales 593,145 534,312
Selling, general, administrative and other operating expenses 76,480 75,038
Depreciation and amortization 7,247 6,790
Interest expense 2,923 2,939
--------- ---------
Total costs and expenses 679,795 619,079
Earnings before income taxes 4,699 4,519
Income taxes 1,903 1,830
--------- ---------
Net earnings $ 2,796 2,689
========= =========
Weighted average number of
common shares outstanding 10,890 10,874
========= =========
Earnings per share $ .26 .25
========= =========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 23, December 30,
ASSETS 1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,008 26,024
Accounts and notes receivable, net 122,813 85,968
Inventories 191,117 183,957
Prepaid expenses 17,225 12,067
Deferred tax assets 4,597 3,674
--------- --------
Total current assets 336,760 311,690
Investments in affiliates 8,537 8,421
Notes receivable, noncurrent 5,167 5,051
Property, plant and equipment:
Land 29,891 28,638
Buildings and improvements 112,110 110,887
Furniture, fixtures, and equipment 212,368 204,054
Leasehold improvements 26,813 25,786
Construction in progress 5,920 6,538
Assets under capitalized leases 12,449 12,923
--------- --------
399,551 388,826
Less accumulated depreciation and amortization (214,100) (210,787)
--------- --------
Net property, plant and equipment 185,451 178,039
Intangible assets, net 48,016 6,282
Deferred tax asset - net 2,850 2,835
Other assets 2,224 1,942
--------- --------
Total assets $ 589,005 514,260
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks, net of cash in banks $ 14,041 28,998
Current maturities of long-term debt and capitalized lease obligations 17,325 14,701
Accounts payable 143,509 127,592
Accrued expenses 36,954 31,745
Income taxes 5,134 4,652
--------- ---------
Total current liabilities 216,963 207,688
Long-term debt 136,006 71,030
Capitalized lease obligations 10,034 10,158
Deferred compensation 7,438 7,625
Other 2,302 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 1995 and 1994 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 (629) -
Retained earnings 189,416 188,578
--------- ---------
218,278 218,347
Less cost of 303 shares of common stock in treasury (2,016) (3,034)
--------- ---------
Total stockholders' equity 216,262 215,313
--------- ---------
Total liabilities and stockholders' equity $ 589,005 514,260
========= =========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twelve Weeks Ended
---------------------------------------
March 23, 1996 March 25, 1995
-------------- --------------
<S> <C> <C>
Operating activities:
Net earnings $ 2,796 2,689
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,247 6,790
Provision for bad debts 389 448
Provision for losses on closed lease locations (151) (84)
Deferred income taxes (938) 216
Deferred compensation (187) (363)
Earnings of equity investments (120) (278)
Other 19 55
Changes in operating assets and liabilities:
Accounts and notes receivable 5,570 5,649
Inventories 13,395 13,249
Prepaid expenses (5,001) (7,813)
Accounts payable (10,722) (1,267)
Accrued expenses 5,071 5,249
Income taxes 482 1,558
--------- ------
Net cash provided by operating activities 17,850 26,098
--------- ------
Investing activities:
Disposal of property, plant and equipment 1,065 928
Additions to property, plant and equipment
excluding capital leases (6,546) (3,418)
Business acquired (87,786) -
Loans to customers (1,268) (1,508)
Payments from customers on loans 1,737 2,271
Other (116) -
--------- ------
Net cash used for investing activities (92,914) (1,727)
--------- ------
Financing activities:
Proceeds from long-term debt 30,000 -
Proceeds from revolving debt 38,600 -
Dividends paid (1,958) (1,958)
Payments of short-term debt - (3,600)
Payments of long-term debt (1,609) (3,221)
Payments of capitalized lease obligations (125) (134)
Other 97 -
--------- ------
Net cash provided by (used for) financing activities 65,005 (8,913)
--------- ------
Net (decrease) increase in cash $ (10,059) 15,458
========= ======
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Fiscal period ended March 23, 1996
December 30, 1995 and December 31, 1994
(In thousands, except per share amounts)
Common stock Additional
-------------------- paid-in Retained
Shares Amount capital earnings
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 11,224 $18,706 11,954 171,670
Net earnings - - - 15,480
Dividend declared of $.73 per share - - - (7,938)
Treasury stock issued upon exercise of options - - 23 -
Foreign currency translation adjustment
- net of a $381 deferred tax benefit - - - -
------ ------- ------ -------
Balance at December 31, 1994 11,224 18,706 11,977 179,212
Net earnings - - - 17,414
Dividend declared of $.74 per share - - - (8,048)
Treasury stock issued upon exercise of options - - 36 -
Foreign currency translation adjustment
- net of a $252 deferred tax benefit - - - -
------ ------- ------ -------
Balance at December 30, 1995 11,224 18,706 12,013 188,578
Net earnings - - - 2,796
Dividend declared of $.18 per share - - - (1,958)
Treasury stock issued upon exercise of options - - 30 -
Issuance of restricted stock (308) -
Amortized compensation under restricted stock - - - -
------ ------- ------ -------
Balance at March 23, 1996 11,224 $18,706 11,735 189,416
------ ------- ------ -------
------ ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fiscal period ended March 23, 1996
December 30, 1995 and December 31, 1994
(In thousands, except per share amounts) Foreign
currency Treasury stock Total
translation Restricted ---------------- stockholders'
adjustment stock Shares Amount equity
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 - - (351) $(3,066) 199,264
Net earnings - - - - 15,480
Dividend declared of $.73 per share - - - - (7,938)
Treasury stock issued upon exercise of options - - 2 12 35
Foreign currency translation adjustment
- net of a $381 deferred tax benefit (572) - - - (572)
------- --------- ------- -------- --------
Balance at December 31, 1994 (572) - (349) (3,054) 206,269
Net earnings - - - 17,414
Dividend declared of $.74 per share - - - (8,048)
Treasury stock issued upon exercise of options - - 3 20 56
Foreign currency translation adjustment
- net of a $252 deferred tax benefit (378) - - - (378)
------- --------- ------- -------- --------
Balance at December 30, 1995 (950) - (346) (3,034) 215,313
Net earnings - - - 2,796
Dividend declared of $.18 per share - - - (1,958)
Treasury stock issued upon exercise of options - - 3 23 53
Issuance of restricted stock - (636) 40 995 51
Amortized compensation under restricted stock - 7 - - 7
------- --------- ------- -------- --------
Balance at March 23, 1996 (950) (629) (303) $(2,016) 216,262
------- --------- ------- -------- --------
------- --------- ------- -------- --------
</TABLE>
- ------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
MARCH 23, 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 March 23, 1996 and December 30, 1995, and
the results of operations for the 12-weeks ending March 23, 1996 and March 25,
1995, and the changes in cash flows for the 12-week period ending March 23, 1996
and March 25, 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 $39.7 million and $40.0 million higher at March 23, 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 March 23, 1996, remaining balances on all notes
receivable sold with recourse was $14.2 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).
<TABLE>
<CAPTION>
Twelve Weeks Ended
-------------------
March 23, March 25,
1996 1995
---------- ---------
<S> <C> <C>
Net revenues $684,494 711,192
Earnings before income taxes 4,699 5,574
Net earnings 2,796 3,322
Earnings per share $ .26 .31
</TABLE>
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
March 23, 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 first quarter of fiscal 1996 increased 9.8% over the same
period last year. The improvement is primarily due to growth in wholesale
revenues resulting from the acquisition of MDV at the beginning of the year.
During the quarter, wholesale segment revenues represented 71.1% of total
revenues compared to 68.5% last year. The retail segment also realized revenue
gains during the quarter with same store sales increasing 2.1% over the
comparable period last year. Increased advertising and promotional activities
geared to offset strong price competition in certain market areas contributed to
the increased retail volume, as did the acquisition of two retail locations from
an existing customer.
Gross margins were 13.3% for the first quarter compared to 14.3% last year. The
decrease resulted from a greater proportion of wholesale sales which achieve
lower gross margins than retail. Wholesale margins were also negatively
impacted by the change in sale mix brought about by the disposition of a
subsidiary, Thomas and 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
centralize buying functions among warehouse groups to provide greater operating
efficiency and lower product costs. Retail margins improved as a result of a
greater distribution of sales to higher margin perishable and specialty
departments within the retail stores.
Operating expenses as a percent of total revenues were 11.2% for the quarter
compared to 12.0% for the same period last year. Expense levels declined as a
percent of revenues as a result of the growing proportion of wholesale revenues
which typically operate at lower expense levels than retail. Also, operating
expenses of newly acquired MDV are lower, as a percent of sales, than those of
the divested T&H operations. Incremental wholesale volume from new independent
retail accounts continues to result in improved productivity at the wholesale
level. Partially offsetting these gains were increased promotional and
advertising costs incurred in retail markets where the Company is experiencing
intense competition. Also, the Company is incurring additional costs associated
with the development of client/server based computer systems and software.
These costs are expected to continue throughout fiscal 1996 and 1997.
Depreciation and amortization expense increased 6.7% compared to last year
primarily due to the $.7 million 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.
<PAGE>
Interest expense declined from last year, despite higher borrowing levels, due
to more favorable borrowing rates. Interest expense as a percent of revenues
was .42% compared to .47% in 1995.
Income tax expense increased due to higher pretax earnings. The effective tax
rate was 40.5%, unchanged from the first quarter last year.
Net earnings for the quarter were $2.8 million compared to $2.7 million last
year, an increase of 4.0%. The earnings improvement is attributed to the
wholesale segment, in particular, the acquisition of MDV which complimented the
two existing east coast military operations and the additional independent
retail volume the company has been servicing since last year.
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 quarter, 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 was $17.9 million compared to $26.1 million last
year. The change was due to a reduction in payables associated with seasonal
fluctuations in inventory and the acquisition of MDV since the end of the year.
On March 22, 1996, the Company finalized an agreement to authorize the issue 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.
The Company believes it will continue to have adequate access of 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 2, 3, 4 and 5 are not applicable.
ITEM 1. LEGAL PROCEEDINGS.
On April 2, 1996, an individual engaged in growing citrus crops in Fresno
County commenced an action against Nash-DeCamp Company, a wholly-owned
subsidiary of the Company, and others, including three of its officers and
directors, in the United States District Court for the Eastern District of
California. Nash-DeCamp Company has provided various services to the plaintiff
relating to the packing, marketing, and distribution of produce grown by
plaintiff, and has advanced financing to assist plaintiff in growing and
harvesting his crops. Plaintiff's complaint alleges that the defendants have
engaged in various acts of misconduct relating to the handling, packaging and
pricing of such produce in violation of various state and federal laws,
resulting in unspecified damages to plaintiff. In his complaint, plaintiff is
seeking to recover unspecified compensatory damages, punitive and exemplary
damages, treble damages, costs of suit, and attorneys' fees, as well as be
granted injunctive relief.
Nash-DeCamp Company has filed an answer raising various defenses to and
denying the allegations set forth in plaintiff's complaint. In addition, Nash-
DeCamp Company has filed a counterclaim to recover monies owed to it by
plaintiff. In the counterclaim, Nash-DeCamp Company is seeking to recover the
outstanding balance of plaintiff's indebtedness to Nash-DeCamp Company as of
April 20, 1996 (together with interest accruing thereafter), costs of suit,
reasonable attorneys' fees, all proceeds from any disposition of the 1995-1996
citrus crops, and other damages and interest. Because plaintiff's complaint has
only recently been filed, Nash-DeCamp Company has only conducted a preliminary
investigation of the factual basis alleged to underlie plaintiff's claims; as a
result, no meaningful assessment of the potential exposure to Nash-DeCamp
Company can be made at this time. Nash-DeCamp Company intends to conduct a full
investigation into the facts alleged to underlie plaintiff's claims and to
vigorously defend the claims in accordance with the results of such
investigation. Nash-DeCamp Company also intends to vigorously pursue the
recovery of the monies owed to it by plaintiff.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
27.1 Financial Data Schedule.
<PAGE>
(b) REPORTS ON FORM 8-K:
Not Applicable
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
- ------- ----
27.1 Financial Data Schedule.
<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: May 7, 1996 By /s/ Alfred N. Flaten
------------------------------
Alfred N. Flaten
Chief Executive Officer
By /s/ John R. Scherer
-------------------------------
John R. Scherer
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-23-1996
<CASH> 1,008
<SECURITIES> 0
<RECEIVABLES> 123,539
<ALLOWANCES> 726
<INVENTORY> 191,117
<CURRENT-ASSETS> 336,760
<PP&E> 399,551
<DEPRECIATION> 214,100
<TOTAL-ASSETS> 589,005
<CURRENT-LIABILITIES> 216,963
<BONDS> 136,006
0
0
<COMMON> 18,706
<OTHER-SE> 197,556
<TOTAL-LIABILITY-AND-EQUITY> 589,005
<SALES> 675,484
<TOTAL-REVENUES> 684,494
<CGS> 593,145
<TOTAL-COSTS> 83,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 389
<INTEREST-EXPENSE> 2,923
<INCOME-PRETAX> 4,699
<INCOME-TAX> 1,903
<INCOME-CONTINUING> 2,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,796
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
