<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 twelve weeks ended March 22, 1997
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 April 29, 1997:
11,302,508 shares
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the twelve week interim period beginning December 29,
1996, through March 22, 1997.
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 auditors 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
Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended
------------------------
March 22, March 23,
1997 1996
--------- ----------
Revenues:
Net sales $ 935,997 675,484
Other revenues 11,835 9,010
--------- ----------
Total revenues 947,832 684,494
Cost and expenses:
Cost of sales 825,189 593,145
Selling, general and administrative
and other operating expenses 99,158 76,480
Depreciation and amortization 10,905 7,247
Interest expense 7,321 2,923
--------- ---------
Total costs and expenses 942,573 679,795
Earnings before income taxes 5,259 4,699
Income taxes 2,203 1,903
--------- ---------
Net earnings $ 3,056 2,796
--------- ---------
--------- ---------
Weighted average number of
common shares outstanding 11,276 10,890
--------- ---------
--------- ---------
Earnings per share $ .27 .26
--------- ---------
--------- ---------
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 22, December 28,
Assets 1997 1996
- ------ ---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 886 921
Accounts and notes receivable, net 196,955 206,062
Inventories 291,207 293,458
Prepaid expenses 27,050 20,492
Deferred tax assets 6,580 4,663
----------- -----------
Total current assets 522,678 525,596
Investments in affiliates 9,877 10,300
Notes receivable, noncurrent 20,628 21,652
Property, plant and equipment:
Land 33,642 33,753
Buildings and improvements 148,186 148,227
Furniture, fixtures, and equipment 300,032 295,147
Leasehold improvements 55,068 54,925
Construction in progress 6,647 7,543
Assets under capitalized leases 26,105 26,105
---------- -----------
569,680 565,700
Less accumulated depreciation and amortization (300,515) (293,845)
---------- -----------
Net property, plant and equipment 269,165 271,855
Intangible assets, net 78,888 80,312
Investment in direct financing leases 21,939 22,011
Deferred tax asset - net 3,777 4,076
Other assets 8,854 9,675
---------- -----------
Total assets $ 935,806 945,477
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks $ 18,541 32,492
Short-term debt payable to banks 9,621 16,171
Current maturities of long-term debt and
capitalized lease obligations 7,374 7,795
Accounts payable 168,307 183,501
Accrued expenses 65,131 54,130
Income taxes 6,310 2,999
---------- -----------
Total current liabilities 275,284 297,088
Long-term debt 374,793 361,819
Capitalized lease obligations 41,739 41,832
Deferred compensation 7,165 7,476
Other 2,259 4,401
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
issued in 1996 and 11,224 in 1995 19,290 19,290
Additional paid-in capital 17,346 16,816
Foreign currency translation adjustment - net of a $633
deferred tax benefit (950) (950)
Restricted stock (493) (500)
Retained earnings 201,363 200,322
---------- -----------
Total liabilities and stockholders' equity 236,556 234,978
Less cost of 274 shares and 307 shares of
common stock in treasury, respectively. (1,990) (2,117)
---------- -----------
Total stockholders' equity 234,566 232,861
---------- -----------
Total liabilities and stockholders' equity $ 935,806 945,477
---------- -----------
---------- -----------
</TABLE>
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See accompanying notes to consolidated financial statements
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twelve Weeks Ended
------------------------------------
March 22, 1997 March 23, 1996
-------------- --------------
<S> <C> <C>
Operating activities:
Net earnings $ 3,056 2,796
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 10,905 7,247
Provision for bad debts 1,293 389
Provision for (recovery from) losses on closed lease locations
on closed lease locations (153) (151)
Deferred income taxes (1,618) (938)
Deferred compensation (311) (187)
Earnings of equity investments (377) (120)
Other 773 19
Changes in operating assets and liabilities:
Accounts and notes receivable 12,056 5,570
Inventories 2,251 13,395
Prepaid expenses (5,908) (5,001)
Accounts payable and outstanding checks (29,145) (10,722)
Accrued expenses 8,849 5,071
Income taxes 3,311 482
------------- -------------
Net cash provided by operating activities 4,982 17,850
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Investing activities:
Dividends received 800 -
Disposals of property, plant and equipment, net 1,292 1,065
Additions to property, plant and equipment - -
excluding capital leases (7,939) (6,546)
Businesses acquired, net of cash acquired (87,786)
Loans to customers (4,632) (1,268)
Payments from customers on loans 1,485 1,737
Loans sold including current portion - -
Other 28 (116)
------------- -------------
Net cash used in investing activities (8,966) (92,914)
------------- -------------
Financing activities:
Proceeds from long-term debt - 30,000
Proceeds from revolving debt 15,000 38,600
Dividends paid (2,015) (1,958)
Payments of short-term debt (6,550) -
Payments of long-term debt (2,264) (1,609)
Payments of capitalized lease obligations (275) (125)
Other 53 97
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Net cash used in
financing activities 3,949 65,005
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Net (decrease) increase in cash $ (35) (10,059)
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Fiscal period ended March 22, 1997,
December 28, 1996 and December 30, 1995
(In thousands, except per share amounts) Common Stock Additional
--------------------------- paid-in Retained
Shares Amount capital earnings
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
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 - - - 20,032
Dividend declared of $.75 per share - - - (8,288)
Shares issued in connection with acquisition of a
business 350 584 5,064 -
Treasury stock issued upon exercise of options - - 47 -
Issuance of restricted stock - - (308) -
Amortized compensation under restricted stock plan - - - -
Treasury stock purchased - - - -
--------- --------- ----------- ----------
Balance at December 28, 1996 11,574 19,290 16,816 200,322
Net earnings - - - 3,056
Dividend declared of $.18 per share - - - (2,015)
Treasury stock issued upon exercise of options - - 74 -
Amortized compensation under restricted stock plan
Distribution of stock pursuant to performance awards - - 456 -
Treasury stock purchased - - - -
--------- --------- ----------- ----------
Balance at March 22, 1997 11,574 $ 19,290 17,346 201,363
--------- --------- ----------- ----------
--------- --------- ----------- ----------
</TABLE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Fiscal period ended March 22, 1997,
December 28, 1996 and December 30, 1995
(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 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 - - - - 20,032
Dividend declared of $.75 per share - - - - (8,288)
Shares issued in connection with acquisition of a
business - - - - 5,648
Treasury stock issued upon exercise of options - - 6 42 89
Issuance of restricted stock - (524) 40 995 163
Amortized compensation under restricted stock plan - 24 - - 24
Treasury stock purchased - - (7) (120) (120)
--------- ------- ------- ------- -------
Balance at December 28, 1996 (950) (500) (307) (2,117) 232,861
Net earnings - - - - 3,056
Dividend declared of $.18 per share - - - - (2,015)
Treasury stock issued upon exercise of options - - 6 30 104
Amortized compensation under restricted stock plan 7 7
Distribution of stock pursuant to performance awards - - 30 147 603
Treasury stock purchased - - (3) (50) (50)
--------- ------- ------- ------- -------
Balance at March 22, 1997 (950) (493) (274) $(1,990) 234,566
--------- ------- ------- ------- -------
--------- ------- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 22, 1997
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 22, 1997 and December
28, 1996, and the results of operations for the 12-weeks ending March 22,
1997 and March 23, 1996, and the changes in cash flows for the 12-week
periods ending March 22, 1997 and March 23, 1996, 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 $41.3 million and $40.0 million higher at March 22, 1997 and at
December 28, 1996, respectively.
NOTE 3
Companies will be required to present earnings per share data, in
accordance with Statement of Financial Accounting Standards (SFAS) NO. 128,
Earnings per Share, commencing with fiscal 1997. Currently earnings per share
calculations are performed pursuant to Accounting Principles Board Opinion No.
15. The computation of earnings per share for both first quarter of fiscal 1997
and 1996 would be the same under either method.
NOTE 4
On September 8, 1995, the Company entered into an agreement with a
financial institution which allowed the Company to sell on a revolving basis
customer notes receivable. Although the agreement lapsed on December 28,
1996, the notes, which have maturities through the year 2002, were sold at
face value with recourse. As a result, the Company is contingently liable
should these notes become uncollectible.
<PAGE>
The remaining balances of such sold notes receivable totaled $12.9 million
and $14.0 million at March 22, 1997 and December 28, 1996, respectively.
NOTE 5
Since the first quarter of fiscal 1996, the Company completed two
acquisitions which were accounted for under the purchase method of accounting.
On November 7, 1996 the Company completed a tender offer to purchase the
outstanding shares of common stock of Super Food Services, Inc. ("Super Food"),
a wholesale grocery distributor based in Dayton, Ohio, for $15.50 per share in
cash. The purchase price exceeded the fair value of the assets acquired
resulting in goodwill of $29.8 million which is being amortized on a straight
line basis over 25 years.
On August 5, 1996, the Company acquired all of the outstanding stock of
T. J. Morris Company ("T. J. Morris"), a full line food wholesaler located in
Statesboro, Georgia. The excess of purchase price over fair value of the
assets acquired resulted in goodwill of approximately $3.1 million which is
being amortized on a straight line basis over a 15-year period.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Super Food and T. J. Morris had been
acquired as of the beginning of 1996, after including the impact of certain
adjustments such as amortization of intangibles, increased interest expense on
acquisition debt and related income tax effects:
Twelve Weeks Ended
PRO FORMA INFORMATION (Unaudited) March 23,
1996
----------
Net revenues 986,436
Earnings before income taxes 5,450
Net income 3,270
Earnings per share .29
---
The pro forma information is provided for informational purposes only. It
is based on historical information and does not necessarily reflect results that
would have occurred had the acquisitions been made as of those dates or results
which may occur in the future.
<PAGE>
NOTE 6
On April 8, 1997, the Company announced it had entered into a definitive
agreement to acquire the business and assets of United-A.G. Cooperative, Inc.
("United-A.G."), a cooperative wholesale grocery distributor located in Omaha.
United-A.G., with revenues of approximately $200 million, serves stores in
Nebraska, Kansas, Iowa, Colorado and South Dakota. The acquisition is expected
to be completed in June 1997.
<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 1997 increased 38.5% over
the same period last year. The improvement is primarily attributed to the
acquisition of Super Food and T. J. Morris which occurred in the second half of
fiscal 1996. Revenues of the military division as well as those from new
independent wholesale accounts also contributed to increases over the prior year
quarter. Retail revenues decreased 1.6% reflecting a net reduction of seven
stores which were either closed or sold since last year. Same stores sales
decreased .8% compared to the same period last year.
Gross margins were 12.9% for the first quarter compared to 13.3% last year.
The decrease resulted from a greater proportion of wholesale sales which achieve
lower gross margins than retail. Margins at wholesale were favorably impacted
by the Company's implementation of regionalized buying offices. Centralization
of buying activities has resulted in operating efficiencies and lower product
costs. Retail margins continued to improve compared to last year due to greater
marketing and merchandising emphasis on higher margin perishables and
specialty departments. This resulted in a greater distribution of overall store
sales to these departments.
Operating expenses as a percent of total revenues were 10.5% for the
quarter compared to 11.2% for the same period last year. The significant
increase in wholesale business, which operates at lower expense levels,
contributed to the reduction in expenses as a percent of revenues. Also,
incremental wholesale volume from new independent wholesale accounts
continues to positively affect operating efficiency at the wholesale level.
During the quarter the Company incurred approximately $1.0 million of
additional expense associated with the upgrading of its computer systems and
software to client/server technology. The upward trend in expenses related
to this project is expected to continue.
Depreciation and amortization expense increased 50.5% compared to last year
primarily due to the acquisition of Super Food and T. J. Morris. Amortization
expense related to goodwill and other intangibles for the quarter was $1.6
million compared to $1.1 million last year. In addition, capital expenditures
related to the project to redesign the computer systems, increased depreciation
by $.5 million.
Interest expense increased $4.4 million compared to the same period last
year largely due to the debt incurred to finance the acquisition of Super
Food. Average short-term borrowings, used to fund working capital needs, were
higher during the quarter compared to last year. Outstanding short-term
borrowings at March 22, 1997 were $9.6 million compared to no outstanding
amounts at the same time last year.
<PAGE>
Income tax expense increased due to higher pretax earnings. The effective
tax rate increased to 41.9%, due to non-tax deductible expenses resulting from
the Super Food and T. J. Morris acquisitions.
Net earnings for the quarter were $3.1 million compared to $2.8 million
last year, an increase of 9.3%. The earnings improvement is attributed to
retail operations, the Company's East Coast military division and the two most
recent acquisitions, partially offset by additional amortization and interest
costs.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements and certain capital expenditures continue to
be funded principally from internally generated funds. However, the Company
uses short and long-term debt to supplement the financing of major capital
projects and acquisitions.
Cash provided from operations was $5.0 million compared to $17.9 million
last year. The change was due to a reduction in payables associated with
seasonal fluctuations in inventory and suppliers' terms. Working capital at
the end of the quarter was $247.4 million, an increase of $18.9 million
during the quarter. The current ratio was 1.90 compared to 1.77 at the end
of last year.
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: May 6, 1997 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 Twelve Weeks Ending March 22, 1997
Item No. Item Method of Filing
- -------- ---- ----------------
27.1 Financial Data Schedule Filed herewith.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-22-1997
<CASH> 886
<SECURITIES> 0
<RECEIVABLES> 216,610
<ALLOWANCES> 19,655
<INVENTORY> 291,207
<CURRENT-ASSETS> 522,678
<PP&E> 569,680
<DEPRECIATION> (300,515)
<TOTAL-ASSETS> 935,806
<CURRENT-LIABILITIES> 275,284
<BONDS> 374,793
0
0
<COMMON> 19,290
<OTHER-SE> 215,276
<TOTAL-LIABILITY-AND-EQUITY> 935,806
<SALES> 935,997
<TOTAL-REVENUES> 947,832
<CGS> 825,189
<TOTAL-COSTS> 933,959
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,293
<INTEREST-EXPENSE> 7,321
<INCOME-PRETAX> 5,259
<INCOME-TAX> 2,203
<INCOME-CONTINUING> 3,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,056
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
